Foreign Direct Investment (FDI) is an investment made by a one country into another country. In Indian context it means an investment directly made by foreign companies directly into the fast growing India in sight of different benefits like cheaper wages, huge consumer base to name a few.
Foreign direct investment introduces by the Finance Minister Dr. Manmohan Singh in India 1991 under Foreign Exchange Management Act to promote such investments thereby increasing supply of international capital, goods, and services & therefore increase the economic growth of the country and it is good for India.
As per the foreign Exchange Management Act, “FDI” means investment by the Non-Resident only means resident of outside India. The capital of an Indian company(Transfer or Issue of Security by a Person Resident outside India) comes under schedule 1 of foreign Exchange Management regulation 2,000.
It is the intent and objective of the Government of India to attract and promote FDI in order to supplement domestic capital, technology and skills, for accelerated economic growth. Because of the FDI we are connected with outside countries and to know about them and take advantages. FDI, as distinguished from portfolio investments, has the connotation of establishing a ‘lasting interest’ in an enterprise that is resident in an economy other than that of the investor.
There are two routes by which India gets its FDI:
- Automatic route: without prior approval by Government
- Government route: Prior approval by government is needed
Among many benefits, following are some which needs a mention like increase in job opportunities in many sectors and as a result, upliftment in the lifestyle of the individuals working there. The savings of Indian consumer will be get good quality products in cheaper rate and it is biggest advantages of FDI, because of that consumer savings are likely to increase 5% to 10%.
FDI is certainly going to increase the employment opportunities in India by providing around 3 to 4 million new jobs. Not only this, it shall also increase the revenues for the Government.
Second effective advantage of FDI is to improving miserable conditions who are committing suicides because of lesser return from their agriculture produce. FDI will certainly help a lot in improving their conditions by organizing the trade, reducing system wastages and thus promising a higher remuneration because of FDI.
Role of Prime Minister Narendra Modi: The foreign visits undertaken by Prime Minister Narendra Modi have yielded positive results in terms of increase in FDI which have witnessed a 40% increase in 2015. The visits have resulted into signing of several trades pacts, establishing framework for improved border defense and space cooperation, promoting campaigns like Digital India, Make in India, etc.
Prime minster has gone abroad over 35 times and has visited number of countries including the US, CHINA, MYANMAR, CANADA, BHUTAN to name a few with FDI in mind specifically. India’s overall trades in goods with these countries has risen by 2.3% from 2013- 14 to 2014-15.
But like every coin has another side, this too is no fairy tail as well. Domestic companies feel the pressure due to competition and (many times) cheaper products which make it tough for them to survive. Our foreign dependency will be increased so it will affect our overall development in technology, agriculture, production etc.
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Writeen by Monika Gupta, student of Semester II, MBA FP 2015-17