Foreign direct Investments: Basics to Know

Foreign direct Investment (FDI) is the inflows in cash as a part of investment for acquiring the management control in an enterprise which is operating in the country than that of such investor. In simple terms, investment directly made by a foreign company business in another company situated in the other country.

It increases the domestic capital cash inflows which ultimately boosts economic growth of the country.



Advantages of FDI

• Increase in employment
• It will create the flow of money in the economy
• It will create the competition among the market which result in better quality product and ultimately the customers will get better price.
• Increase in Infrastructure.
• Increases the standards of goods produce.
• The government will have better image at the global point of view for the country as a whole.

Disadvantages of FDI

• Inflation would increase due to the foreign influence.
• Increases Monopoly.
• Domestic market players would suffer due to the new entrants in the market which would affect their selling power.

FDI would lead to a more comprehensive integration of a country into the world markets. It enables a country to create a strong position in globally by exporting its quality products and services.

While FDI has been opposed by several in the past citing fears of loss of employment, adverse impact on traditional retail, adherents of the same indicate increased transfer of technology, enhanced supply chain efficiencies and increased employment opportunities as the perceived benefits.

 

FDI is good for any country to develop economically & technologically.