Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B.

It usually involves participation in management, joint-venture, transfer of technologyand 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 shares.
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1 History 2 Types 3 Methods 4 Global Foreign Direct Investment 5 Foreign direct investment in the United States 6 Foreign direct investment in China 7 Foreign direct investment in India 8 Foreign direct investment and the developing world 9 See also 10 References 11 External links

[edit]History FDI is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. The figure below shows net inflows of foreign direct investment in the United States. The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply. US International Direct Investment Flows: Period FDI Outflow FDI Inflows Net
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1960-69 $ 42.18 bn

$ 5.13 bn

+ $ 37.04 bn

1970-79 $ 122.72 bn

$ 40.79 bn

+ $ 81.93 bn

1980-89 $ 206.27 bn

$ 329.23 bn

- $ 122.96 bn

629.Export Processing Zones Bonded Warehouses Maquiladoras .81 bn + $ 246. or any combination of the above.88 bn [edit]Types A foreign direct investor may be classified in any sector of the economy and could be any one of the following: [citation needed]         an individual.47 bn $ 907. an estate (law). a group of related enterprises. [edit]Methods 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 company by acquiring shares in an associated enterprise through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor or enterprise [citation needed] Foreign direct investment incentives may take the following forms:         low corporate tax and income tax rates tax holidays other types of tax concessions preferential tariffs special economic zones EPZ .950.05 bn $ 1.421.74 bn Total $ 2.31 bn + $ 207. a group of related individuals.703.69 bn $ 2. trust or other social institution.1990-99 $ 950. a public company or private company.13 bn 2000-07 $ 1.34 bn + $ 43. a government body. an incorporated or unincorporated entity.

The $2. The figures was 25 percent below the pre-crisis average between 2005 to 2007. which is a 37 percent increase from 2007. More than $325. resulting in close to $314 billion in investment. In 2010 was $1. The ³Invest in America´ policy is focused on:     Facilitating investor queries.122 billion and in 2009 was $1.114 billion.55 Benefits of FDI in America: In the last 6 years.  Offering policy guidelines and helping getting access to the legal system. Carrying out maneuvers to aid foreign investors.        investment financial subsidies soft loan or loan guarantees free land or land subsidies relocation & expatriation subsidies job training & employment subsidies infrastructure subsidies R&D support derogation from regulations (usually for very large projects) [edit]Global Foreign Direct Investment [3] UNCTAD said that no significant growth of Global FDI. gross domestic product (GDP). [5] . US affiliates of foreign companies have a history of paying higher wages than US [citation needed] corporations.[citation needed] Foreign companies have in the past supported an annual US payroll of $364 billion with an average annual compensation of $68.000 new jobs have been created by foreign companies.[citation needed] Unarguably. [edit]Foreign direct investment in the United States [4] "Invest in America" is an initiative of the US Department of Commerce and aimed to promote the arrival of foreign investors to the country.3 billion in FDI flowed into the United States in 2008. FDI has resulted in 30% of jobs for Americans in the manufacturing sector.1 trillion stock of FDI in the United States at the end of 2008 is the equivalent of approximately 16 percent of U. The United States is the world¶s largest recipient of FDI. Provide support both at local and state levels.S.000 per employee. which accounts for 12% of all manufacturing jobs in the US. over 4000 new projects and 630. Increased US exports through the use of multinational distribution networks. Address concerns related to the business environment by helping as an ombudsman in Washington DC for the international venture community.

construction activities and computer software and hardware. Mauritius. Types of Foreign Direct Investment: An Overview FDIs can be broadly classified into two types: outward FDIs and inward FDIs. [edit]Foreign direct investment in India A recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010-2012. Many of the East Asian tigers such as China. FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor.Affiliates of foreign corporations spent more than $34 billion on research and development in 2006 and continue to support many national projects. [edit]Foreign [6] direct investment in China Starting from a baseline of less than $19 billion just 20 years ago. 2010 has again seen investments increase. This classification is based on the types of restrictions imposed. Inward FDI has led to higher productivity through increased capital.88 billion was lower by five per cent from USD 27. Foreign direct business relationships give rise to multinational corporations. the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. in addition to an increase in the transfer of skills. FDI for 2009-10 at USD 25. An outward-bound FDI is backed by the government against all types of associated risks. For an investment to be regarded as an FDI. . The investing firm may also qualify for an FDI if it owns voting power in a business enterprise operating in a foreign country. technology. and Singapore benefited from investment abroad. FDI in China has grown to over $300 billion in the first 10 years. Malaysia. the sectors which attracted higher inflows were services.33 billion. [citation needed] Even though there was a slight dip in FDI in 2009 as a result of the global slowdown. It provides an inflow of foreign capital and funds. telecommunication. the US and the UK were among the leading sources of FDI. and the various prerequisites required for these investments. and job opportunities. [edit]Foreign [7] direct investment and the developing world Foreign investment can be a significant driver of development in poor nations. which in turn has led to high living standards. China has continued its massive growth and is the leader among all developing nations in terms of FDI.33 billion in the previous fiscal. the lowest in 2010 fiscal. As per the data. South Korea. Foreign direct investment in August dipped by about 60 per cent to USD 1. FDIs require a business relationship between a parent company and its foreign subsidiary. Singapore. industry department data released showed. The Commitment to Development Index ranks the "development-friendliness" of rich country investment policies.

Some foreign direct investments involve the transfer of strategic assets. Risk coverage provided to the domestic industries and subsidies granted to the local firms stand in the way of outward FDIs. and the removal of restrictions and limitations. as well as the development of roads and highways.' Different economic factors enco urage inward FDIs. Horizontal foreign direct investments happen when a multinational company carries out a similar business operation in different nations. which supplies input for it or uses the output produced by the MNC. growth and development. Factors detrimental to the growth of FDIs include necessities of differential performance and limitations related with ownership patterns. This money has allowed India to focus on the areas that may have needed economic attention. . In 1998 and 1999. Vertical Foreign Direct Investment takes place when a multinational corporation owns some shares of a foreign enterprise. Other categorizations of FDI exist as well. and in joint ventures. nuclear. FDI is not permitted in the arms.' Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI activities may also be carried out to ensure optimization of available opportunities and economies of scale. and address the various problems that continue to challenge the country. grants. with opportunities for foreign investors. which are also known as 'direct investments abroad. Foreign Direct Investment is guided by different moti ves. FDIs that are undertaken to strengthen the existing market structure or explore the opportunities of new markets can be called 'market-seeking FDIs. through private equity or preferential allotments. subsidies. FDI in India has .This form of FDI is subject to tax incentive s as well as disincentives of various forms. India has continually sought to attract FDI from the world¶s major investors.in a lot of ways . tax breaks. These include interest loans. A number of projects have been announced in areas such as electricity generation. the Indian national government announced a number of reforms designed to encourage FDI and present a favorable scenario for investors. distribution and transmission. by way of capital markets through Euro issues. In this case. coal & lignite or mining industries. the foreign direct investment is termed as 'efficiency -seeking. railway.' 'Resource-seeking FDIs' are aimed at factors of production which have more operational efficiency than those available in the home country of the investor. FDI investments are permitted through financial collaborations.enabled India to achieve a certain degree of financial stability.

with a stable democracy and a smoother approval process. FDI is allowed in financial services.6 billion that flowed into China.The Indian national government also provided permission to FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels.500 crores. but with a limit on foreign equity of INR 1. although there is condition that stipulates that these banks must be multilateral financial organizations. big growth compared to previous years. India received $5. Currently. lag so far behind China in FDI amounts? Although the Chinese approval process is complex. These services include the non -banking financial services sector. Federal democracy is perversely an impediment for India.3 billion in FDI. India actually receives less than half the FDI that the federal government approves. and this often leads to projects getting bogged down in red tape and bureaucracy. but less than 10% of the $60.5m. Up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sector can also be purchased. approximately $352. Why does India. Govt for more conducive investment policies PTI SHARE · PRINT · T+ . in cluding the growing credit card business. By 2004. Local authorities are not part of the approvals process and have their own rights. Foreign investors can buy up to 40% of the equity in private banks. it includes both national and regional approval in the same process.

FEB 21: With decline in FDI inflows. M s Pratibha Patil. which have been allowed in the wholesale cash and carry business. encouraging public as well as private investment and domestic as well as foreign investment. Tesco and Metro. said in her address to Parliament today. . still there is no room for complacency. "We have to maintain the momentum for reforms on a wide front. She said although the Indian economy is on a high growth trajectory. particularly foreign direct investment.'' the President. the Government has said that it needs to work on reform -friendly policies to attract increased overseas investment in the country. FDI inflows declined by 23 per cent to $16.87 billion in the year-ago period. are lobbying hard with the Government to open FDI in multi -brand retail. While the Government has taken preliminary steps like initiating discussions on allowing FDI into multi-brand retail and increasing the cap on overseas equity in defence production. Ms Pratibha Patil. "We have to strive to make the domestic environment more conducive to investment. (file photo) RELATED TOPICS economy (general)foreign direct investment NEW DELHI. the decisions remain pending for long. During April-December this fiscal.03 billion from $20.The HinduThe President. Global retail chains like Wal-Mart.'' Ms Patil said.

A report released in February 2010 by Leeds University Busine ss School. ranks India among the top three countries where British companies can do better business during 2012 -14."The policies followed to handle the global financial meltdown stand vindicated. more and more Canadian firms are now focusing on India as an investment destination. Foreign Direct Investment Last Updated: December 2010 India has been ranked at the second place in global foreign direct investments in 2010 and will continue to remain among the top five attractive destinations for international investors during 2010-12 period. regulations. According to Ernst and Young's 2010 European Attractiveness Survey. while telecommunications including radio paging.392 million in October 2010. foreign investors can inject their funds though the automatic route in the Indian econ omy. according to data released by DIPP.062 million during the same period. However. first undertaken in March 2010. The automobile industry received FDI worth US$ 436 million. according to the data released by the Department of Industrial Policy and Promotion (DIPP). there is no room for complacency. with FDI worth US$ 2. Mauritius has led investors into India with US$ 4.163 million during April -October 2010. The 2010 survey of the Japan Bank for International Cooperation released in December 2010. Investment Scenario In the year 2010. majorly because of the implementation of its consolidated FDI policy. The consolidation. India attracted FDI equity inflows of US$ 1.480 million worth of FDI comprising 42 per cent of the total FDI equity inflows into the country. The cumulative amount of FDI equity inflows from April 2000 to October 2010 stood at US$ 122. it is ranked the 2nd most attractive destination following China in the next three years.'' Ms Patil added. However. commissioned by UK Trade & Investment (UKTI).282 million and the US with US$ 908 million. conducted among Japanese investors continues to rank India as the second most promising country for overseas business operations. Reforms in insurance sector are also on the agenda and the Bill relating to this is pend ing in Parliament. pulls together in one document all previous acts. the Indian company receiving such investment would be required to intimate the RBI of any such investment. The FDI rules applicable to such sectors are. cellular mobile and basic telephone services attracted second largest amount of FDI worth US$ 1. . therefore. However. Metallurgical industries were the third highest sector attracting FDI worth US$ 920 million followed by power sector which garnered US$ 729 mil lion during the financial year April -October 2010.68 billion. Such investments do not mandate any prior government permission. According to the modified policy. press releases and clarifications issued either by the DIPP or the Reserve Bank of India (RBI) where they relate to FDI into India. 'World Investment Prospects Survey 2009-2012'. according to United Nations Conference on Trade and Development (UNCTAD) in a report on world investment prospects titled.4 per cent in 2010. India is ranked as the 4th most attractive foreign direct investment (FDI) destination in 2010. Moreover. after China. During April-October 2010. The FDI equity inflows in Mauritius is followed by Singapore at US$ 1. India has assumed a notable positi on on the world canvas as a key international trading partner. The services sector comprising financial and non -financial services attracted 21 per cent of the total FDI equity inflow into India. fairly clear and unambiguous. From 8 per cent in 2005. according to the Asian Investment Intentions survey released by the Asia Paci fic Foundation in Canada. the percentage of Canadian companies showing interest in India has gone up to 13. press not es.