Foreign
Direct Investment - FDI
Foreign Direct Investment is an
investment made between two countries through companies or entities. Entities
making direct investments typically have a compelling effect and control over
the company into which the investment is made. Foreign Direct Investment acts
as a source of capital; it has increased employment in our country. Open
economies with skilled workforces and good growth prospects tend to attract
larger amounts of foreign direct investment than closed, highly regulated
economies. Foreign Direct Investment has helped in raising capital, boosted
economic attention, released the markets, increased competition and advanced
technologies.
Foreign direct investments are
different from indirect investments. Developing countries always need financial
support in order to achieve stability in economy. Foreign Direct Investment is
mostly observed in developing countries. Similarly, India being developing
country is always ready to apprehend for foreign direct investment in a
maneuver of becoming a developed economy. We all know that Indian economy is a
flourishing and it holds highly strong position. Indian economy registers hike
in figures of economy when globally there was a heavy financial meltdown. Due
to this growth, investors of overseas are confident and interested to invest in
India which is giving a boost to Foreign Direct Investment. An Indian company
may receive Foreign Direct Investment under the two routes as given under:
i. Automatic Route
FDI is allowed under the
automatic route without prior approval either of the Government or the Reserve
Bank of India in specific sectors as specified in the FDI Policy, issued by the
Government of India.
FDI in activities not covered
under the automatic route requires approval of the Government which is
considered by the Foreign Investment Promotion Board (FIPB), Department of
Economic Affairs and Ministry of Finance.
India is the 3rd largest economy
of the world in terms of purchasing power parity (PPP) and thus looks
attractive to the world for FDI. Even
Government of India, has been trying
hard to do away with the FDI caps for majority of the sectors, but there are
still critical areas like retailing and insurance where there is lot of
opposition from local Indian companies.
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