Foreign direct investment

Presented by,
M.V.Remya
Foreign Direct Investment

 FDI (Foreign Direct Investment) is an investment made

by a firm or individual in one country into business
interests located in another country.
 FDI takes place when an investor establishes foreign
business operations or acquires foreign business assets,
including establishing ownership or controlling interest
in a foreign company.
 it provides opportunity for technological transfer and
upgradation.
 It helps in broaden the market accessibility for both host
and home countries.
 It helps in invention and innovation of international
markets.
TYPES OF FDI

 Horizontal FDI:
Investment in the same industry abroad as a firm
operates in at home.
 Vertical FDI:
It takes place when a firm through FDI moves upstream or
downstream in difference value chains i.e., when firms
perform value adding activities stage by stage in a vertical
fashion in a host country.
 Merger and acquisition (M & A):
It is a general term that refers to the consolidation of
companies. Differentiating the two terms, merger and
acquisitions.
 Mergers is the combination of two companies to form
one, while acquisitions is one company taken over by
the other.
Green field investment: it is a form of foreign direct
investment where a parent company starts a new venture in
a foreign country by constructing new operational
facilities. In addition to building new facilities, most
parent companies create long-term jobs in the host country
by hiring new employees.
Brown field: when a company or a government entity
purchases or leases existing production facilities to launch
a new production activity.
 Is a combination of green field and M&A and then make
huge investment for replacing plant and machinery in
the target company.
Advantages and Disadvantages of FDI in India

Advantages
 Employment generation.
 Quality of products and flow of technology.
 Improvement of agricultural sector.
 Increase in government revenue.
Disadvantages
 Bad deal for the small entrepreneurs.
 Trade deficit.
 Inflation
 Corruption.
Thank you