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Foreign Capital

Foreign capital refers to any inflow of capital from abroad and can take the form of foreign aid, loans, grants, or foreign investment. Developing countries rely on foreign capital because they often lack adequate domestic capital for economic development projects and bringing in technical skills. Foreign direct investment is a type of foreign capital where a foreign investor has control over a company in another country. India has benefited greatly from foreign capital through job creation, technology upgrades, and increased investment and exports.

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573 views12 pages

Foreign Capital

Foreign capital refers to any inflow of capital from abroad and can take the form of foreign aid, loans, grants, or foreign investment. Developing countries rely on foreign capital because they often lack adequate domestic capital for economic development projects and bringing in technical skills. Foreign direct investment is a type of foreign capital where a foreign investor has control over a company in another country. India has benefited greatly from foreign capital through job creation, technology upgrades, and increased investment and exports.

Uploaded by

kevin ahmed
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FOREIGN CAPITAL

Umair Ahmad
Usama Ali
Ummay Saadqua
Tuba Ahmad
Wasim Siddiqui
BBA 6th Sem, Sec B
FOREIGN CAPITAL

 Foreign capital is a comprehensive word that includes


any inflow of capital in home country from abroad.
 It may be in the form of foreign aids or loans and
grants from the host country or an institution at the
government level as well as foreign investment and
commercial borrowings at the enterprise level or both.
 Foreign capital may flow in any country with
technological collaboration as well.
NEED FOR FOREIGN
CAPITAL
 Inadequacy of domestic capital.
 Foreign capital can show the way for domestic
capital.
 Speeding up economic activity in the
developing country.
 Financing of projects needed for economic
development .
 Bringing in technical know-how, business
experiences and knowledge .
ROLE OF FOREIGN
CAPITAL

 Increase in resources
 Risk taking
 Technical know-how
 High standards
 Marketing facilities
 Increased competition
TYPES OF FOREIGN
CAPITAL
TYPES OF FOREIGN
CAPITAL
 Foreign aid : It consist of loans and grants. Loans
may be taken from individual countries or from
institutional agencies like World Bank, IMF and
international financial Corporation .Usually loans
are taken for medium and long term capital
needs of a country.
 Private foreign investment: Foreign investment
and collaboration with a foreign nation are
closely interrelated, but they are different from
each other.
ADVANTAGES OF
FOREIGN INVESTMENT
 Economic development stimulation
 Easy international trade
 Employment and economic boost
 Development of human capital resource
 Tax and incentives
 Resources transfer
 Reduced disparity between revenue and costs.
 Increased productivity
 Increment in income
FOREIGN DIRECT
INVESTMENT
 Foreign direct investment (FDI) is an investment in
a business by an investor from another country
for which the foreign investor has control over the
company purchased.
 The Organization of Economic Cooperation and
Development (OECD) defines control as owning
10% or more of the business.
 Businesses that make foreign direct investments
are often called multinational corporations
(MNCs) or multinational enterprises (MNEs)..
TYPES OF FDI

 There are two types :


1) Resource-seeking FDI- it is motivated by the
availability of natural resources in the host
countries .
2) Market seeking FDI- The main motive for a firm
to engage in foreign market is primarily due to
four reasons - seeking natural resource, seeking
a market, seeking efficiency and strategic
asset seeking.
BENEFITS OF FDI

 Raising the level of investment


 Upgradation of technology
 Improvement in export competitiveness
 Employment generation
 Benefits to consumers
 Revenue to government
FDI IN INDIA
 FDI in India is a major monetary source for economic
development in India.
 Economic liberalization started in India in wake of the
1991 economic crisis and since then FDI has steadily
increased in India.
 It created more than one crore jobs.
 According to the Financial Times, in 2015 India
overtook China and the United States 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.
CONCLUSION

 Economic reforms in India has deregulated the


economy and stimulated domestic and foreign
investment, taking India firmly into the forefront of
investment destinations. The government ,keen
to promote FDI in the country, has radically
simplified and rationalized policies, procedures
and regulatory aspects.

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