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  • Category: Miscellaneous

    Let us learn: What is FDI and why is it important?

    We always hear about the flow of FDI during various discussion on economy of the country. So, we must learn about FDI and its importance in the country's economy. Let us discuss:

    Foreign direct investment (FDI) is the investment made by a company or individual in business interests located in a different country. Foreign direct investments can be made in various ways, including the opening of a subsidiary or associate company in a foreign country, acquiring a controlling interest in an existing foreign company, or by means of a merger/joint venture with a foreign company.

    For Indian economy, FDI is immensely important. Direct investment by a foreign entity provides capital and resources to develop the Indian company. It also helps to gain technical expertise in the particular field in which the company operates. Ultimately it helps the overall sector to develop and has positive impact of Gross Domestic Product (GDP) of the country ensuring economic prosperity. FDI in various sectors results in re-creating demands. So, in a nutshell, regular and increasing flow of FDI causes the economy of the country to flourish.

    However, we have to remember that FDI may have some disadvantages also. Countries, especially the developing countries, should always monitor and, if necessary, limit foreign ownership of companies in strategically important industries. Excessive FDI can lower the comparative advantages of such developing countries. Moreover, sophisticated foreign investors might strip the business of its value instead of adding any. Moreover, the foreign investors can sell off the unprofitable portions of the company to the local, less sophisticated investors.
  • #579436
    FDI is the business felicitation partner to the Indian counterpart with agreement to share the profit and loos on 48 by 52 percent basis. Though many Indian companies are having their own research and development wing to further improve the products, with the introduction of FDI regime our companies are getting the foreign expertise at no extra cost and thus they can divert the amount to further expansion. But what is bothering us is the fact that foreign brands are ruling the market and Indian brands are getting obsolete and out dated. There is a need to given equal play field for the both.
    K Mohan
    I consider myself as the learner everyday

  • #579453
    FDI has to be seen from the point of view of Baba Ramdev also.

    We have to go for FDI in many areas where we lack technical expertise and have to depend on a foreign country for technology. Unfortunately, despite all the progress we have made so far (the glorious mythological period not to be counted) we lack the resources, conducive environment and will to carry out original R & D work though there is no dearth of talent. The same talent works for countries like the USA because in India we have to function within a system of reservation policy.

    In the above backdrop, we have to promote FDI which means sharing the major chunk of profit with the foreign companies without which they will not come forward.

    Let us encourage each other in sharing knowledge.


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