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Financial Times

This document provides an introduction to concepts related to foreign direct investment (FDI) according to standards set by international organizations. It discusses the relationship between FDI and measures of the balance of payments and international investment position. It also gives an overview of FDI definitions, concepts, and recommendations from manuals published by the IMF and OECD. Additionally, it provides a brief overview of FDI trends in India, noting that economic liberalization beginning in 1991 led to steady increases in FDI inflows, which have generated over one crore jobs and made India the top destination for FDI in 2015, attracting more investment than China and the US.

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32 views1 page

Financial Times

This document provides an introduction to concepts related to foreign direct investment (FDI) according to standards set by international organizations. It discusses the relationship between FDI and measures of the balance of payments and international investment position. It also gives an overview of FDI definitions, concepts, and recommendations from manuals published by the IMF and OECD. Additionally, it provides a brief overview of FDI trends in India, noting that economic liberalization beginning in 1991 led to steady increases in FDI inflows, which have generated over one crore jobs and made India the top destination for FDI in 2015, attracting more investment than China and the US.

Uploaded by

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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

1 Introduction

Foreign Direct Investment (FDI) from the viewpoint of the Balance of Payments and the

International Investment Position (IIP) share a same conceptual framework given by the

International Monetary Fund (IMF). The Balance of Payments is a statistical statement that

systematically summarises, for a specific time span, the economic transactions of an economy

with the rest of the world (transactions between residents and non-residents) and the IIP

compiles for a specific date, such as the end of a year, the value of the stock of each financial

asset and liability as defined in the standard components of the Balance of Payments.

We will not deal in this note with other relevant statistical concepts for operations overseas,

particularly for financial institutions, such as exposure (foreign claims, international claims,

etc.), which belong to the realm of the BIS statistics.3

Sections 2, 3 and 4 give an overview of FDI definitions, concepts and recommendations adopted

by the IMF's Balance of Payments Manual (5th Edition, 1993) and by the OECD's Benchmark

Definition of Foreign Direct Investment (3rd Edition, 1996). Both provide operational guidance

and detailed international standards for recording flows and stocks related to FDI. Section 5

gives a quick overview of trends in FDI inward flows and stocks for the period 1980-2001.

Section 6 reports on onward FDI flows for Spain, with particular attention to the financial

sector. Finally a brief description of the main available sources of FDI is found in an annex.

1.2 Foreign direct investment in India


Foreign direct investment (FDI) in India is the major monetary source for economic
development in India. Foreign companies invest directly in fast growing private Indian
businesses to take benefits of cheaper wages and changing business environment of
India. Economic liberalisation started in India in wake of the 1991 economic crisis and since
then FDI has steadily increased in Indialt were Manmohan Singh and P. V. Narasimha Rao who
brought FDI in India, which subsequently generated more than one crore jobs. According to
the Financial Times, in 2015 India overtook China and the US as the top destination for the
Foreign Direct Investment. In first half of the 2015, India attracted investment of $31 billion
compared to $28 billion and $27 billion of China and the US respectively.

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