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‘FDI: Towards Economic Growth’ By: Prathmesh Galphade (Bhusawal Arts, Science and P.O. Nahata Commerce College)
What is FDI? According to Investopedia, A foreign direct investment (FDI) is a purchase of an interest in a company by a company or an investor located outside its borders. In the Context of India, when a company located outside of India invests money in India it is called FDI. There is a difference between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). In FDI, a significant and large amount of direct investment is done either by establishing a subsidiary company, acquisition & merger or by creating a joint venture, whereas FPI is an indirect investment done by purchasing the financial assets of a country through means like Stock Market. FDI is more favourable to a country as it is long-term and even helps the economy grow, unlikely to FPI where brought assets could be sold off very easily. Example of FDI- The acquisition of Flipkart by Walmart in a $16 billion deal, which granted Walmart a 77% stake in Flipkart. Example of FPI- Investment is done by foreign companies in the Indian Stock Market. Green-Field and Brown Field Investments Green-Field are completely new Investments like the opening of a subsidiary company by a parent company in the country and then building Infrastructure needed to function, on the other hand In Brown-Field Investments the parent company just purchases an existing entity or leases it to save both money and time. How it helps the economy grow? FDI helps an Economy grow in many different ways
FDI
Capital Flow
Employment
Human Resource Development
Economic Growth
Increase in Exports
Competiton Creation
