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Foreign Direct Investment (Fdi) Essay

1683 words - 7 pages

Foreign Direct Investment (FDI)Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest(10percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.[1]It is the sum of equity capital,other long-term capital, and short-term capital as shown in the balance of payments.It usually involves participation in management, joint-venture, transfer of technology and expertise.There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of sharesFDI is a measure of ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as the measure of growing economic globalization.The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods:by incorporating a wholly owned subsidiary or companyby acquiring shares in an associated enterprisethrough a merger or an acquisition of an unrelated enterpriseparticipating in an equity joint venture with another investor or enterprise....FDI in India:Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that needed a boost and economic attention, and address the various problems that continue to challenge the country.FDIs are permitted through financial collaborations, through private equity or preferential allotments, by way of capitalmarkets through euro issues, and in joint ventures. FDI is not permitted in the arms, nuclear, railway, coal or mining industries.A number of projects have been implemented in areas such as electricity generation, distribution and transmission, as well as the development of roads and highways, with opportunities for foreign investors.The Indian national government also granted permission for FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately $352.5 million.Currently, FDI is allowed in financial services, including the growing credit card business. These also include the non-banking financial services sector. Foreign investors can buy up to 40% of the equity in private banks, although there is condition that these banks must be multilateral financial organizations. Up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sector can also be purchased.( 100% in construction of bridges n tunnel , 40% equity in private banks , 45% in...

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