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The cumulative inflows from foreign institutional investors (FIIs) have crossed the $23-billion mark in the current calendar year. This is the highest-ever inflow in one calendar year since 2010 and the second-highest in the last 14 years.
Advantages of FDI
Economic growth Trade Employment and skill levels Technology diffusion and knowledge transfer Linkages and spillover to domestic firms Improves trade.(supply increases)
Disadvantages of FDI
It affects small vendors.(Recent Wal-Mart issue)(Domestic market suffers) Prices of goods likely to rise.(No guarantee of reasonable price) long-run balance of payment position of the Indian economy is risked when the investor manages to recover its initial outlay. Lot of procedures and products may not be in tune with Indian preferences.(People think this as threat but i don't know much about it) Inflation Risk(because you don't understand the underlying intentions of the country or firm making the investment)
FDI Facts
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. The country had attracted FDI of $34.62 billion in 2011, according to the department of industrial policy and promotion data. India has attracted foreign direct investment (FDI) of $22.78 billion in 2012, a decline of 34 per cent over the previous year due to global economic uncertainties.
Netherlands
8% 5% 16% United Kingdom
Difference between FDI (Foreign Direct Investment) and FII (Foreign institutional investors)
FDI is long term investment FDI investment in physical assets In FDI deals with primary market FDI directly impact on employment and wages Aim of FDI is for increase capacity and productivity of enterprises FII is for short term In FII investment in financial market FII deals with secondary market FII there is no impact on employment and wages Aim of FII only increase the capital flow
Sales
20.40%
46.90% 16.30%
7.80% 4% 4.60%
Conclusion
As the world turns into a global village, India has jumped ahead of its peer countries due to its investment opportunities, huge growth potential and favorable business environment. In the process, it has become a hub of Foreign Direct Investment (FDI). The steady growth of foreign investment for the past few years has become one of the pivotal factors in determining the step of growth of the economy. Foreign investment in India is a vital growth driver for India Inc. The infusion of foreign funds has largely stimulated the growth of the Indian economy and with the government further liberalizing and streamlining foreign investment policies and procedures, it will hopefully play a crucial role even in the times to come.