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FOREIGN DIRECT INVESTMENT (FDI

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FORGIEN DIRECT INVESTMENT
‡ The foreign direct investment definition says the direct investments in any productive assets in a country by any foreign company is called foreign direct investment or FDI. ‡ Foreign Direct Investment includes investments in the infrastructure development projects including construction of bridges and flyovers, finance sector including banking and insurance services , real estate development , retail sector etc.

Benefits and cost to host country
Benefits ‡ Availa ility f scarce fact r f r cti . ‡ I r ve e t i t e ala ce f ay e t. ic a ‡ B il i g f ec s cial i frastr ct re. ic ‡ F steri g f ec c alle ges. ‡ Stre gt e i g g ver e t get. Cost ‡ Strai e ala ce f ay e t f ll wi g reverse fl w. rt ‡ e e e ce t e i tec l gy. ‡ E l y e t ex atriates. l gy. ‡ I a r riate tec ‡ U ealt y c etiti . litical ‡ C lt ral a i terfaces.

Benefits and cost to home country
Benefits ‡ Availa ility f raw aterial. ‡ I r ve e t f ala ce f ay e t. ‡ E l y e t ge erati . ‡ Reve e t t e g ver e t. litical relati s. ‡ I r ve Cost ‡ U esire tfl w f fact r f r cti . ‡ P ssi ility f c flict wit t e st c try g ver e t.

Strategy for FDI
‡ FI M-S E IFI ST ATE GY. ‡ OST-E ONOMISING ST ATE GY. ‡ ST ATE GY OF ENTE ING IN NEW A EAS. OSS-INVESTMENT ST ATE GY. ‡ ‡ JOINT-VENT E WITH A IVAL FI M.

Benefits
‡ ‡ ‡ It helps in the economic development of the particular country. Foreign direct investment also permits the transfer of technologies. It also assists in the promotion of the competition within the local input market of a country. ‡ Develop the human capital resources by getting their employees to receive training on the operations of a particular business. ‡ Foreign direct investment can also bring in advanced technology and skill set in a country. ‡ Foreign direct investment assists in increasing the income that is generated through revenues realized through taxation. ‡ It also opens up the export window .

Disadvantages
‡ One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected. ‡ where the host country has some sort of national secret ± something that is not meant to be disclosed to the rest of the world. It has been observed that the defence of a country has faced risks as a result of the foreign direct investment in the country. ‡ ‡ Foreign direct investment may entail high travel and communications expenses. The differences of language and culture that exist between the country of the investor and the host country could also pose problems in case of foreign direct investment. ‡ ‡ There is a chance that a company may lose out on its ownership to an overseas company. At times there have been adverse effects of foreign direct investment on the balance of payments of a country.

In India, FDI Policy allows for Investment through
‡ ‡ ‡ ‡ Through financial alliance Through joint schemes and technical alliance Through capital markets, via Euro issues Through private placements or preferential allotments .

FDI in India is not allowed under the following industrial sectors:
‡ ‡ ‡ ‡ ‡ Arms and ammunition Atomic Energy Coal and lignite . Rail Transport Mining of metals like iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc

Examples
‡ ‡ ‡ ‡ ‡ ‡ ‡ Panasonic is planning to line up US$ 200 million investment in India over the next 3 years for setting up new units, brand positioning and upgrading its facilities. Japanese engineering major, Toshiba plans to put up a power boiler plant at Ennore, north of Chennai with an initial investment of around US$ 232.91 million. Dell would be investing more in India to commensurate with the growth of its products. Intel Corp will invest US$ 40 billion in partnership with Indian IT companies to create an endto-end IT solution for the health sector in the country. HPCL and Mittal Energy will together put in US$ 81.94 billion worth investment in developing a petrol hub. Havells India will bring in US$ 64.92 million as issue of shares and convertible warrants. Essar Power will infuse up to US$ 2 billion as foreign equity for undertaking various downstream projects, including power and coal mining.