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FDI , its advantages and disadvantages

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FDI , its advantages and disadvantages

  1. 1. FDI (FOREIGN DIRECT INVESTMENT)
  2. 2. WHAT IS FDI ALL ABOUT??
  3. 3.  FDI occurs when an investor based in one country (the home country) acquires an asset in another country ( the host country) with the intent to manage the asset.  investments can take place for many reasons, including to take advantage of  cheaper wages,  special investment privileges (e.g. tax exemptions) offered by the country.
  4. 4. WHY COUNTRIES SEEK FDI ?  Domestic capital is inadequate for purpose of economic growth;  Foreign capital is usually essential, at least as a temporary measure, during the period when the capital market is in the process of development;  Foreign capital usually brings it with other scarce productive factors like technical know how, business expertise and knowledge
  5. 5. TYPES  Horizontal FDI : investment in the same industry abroad as a firm operates in at home  Platform FDI : a source country into a destination country for the purpose of exporting to a third country.  Vertical FDI : It takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country
  6. 6. 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 anywhere  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
  7. 7. ADVANTAGES:  Infrastructure and technology transfer Increased Productive efficiency due to competition from multinational subsidiaries  Employment  Consumer benefit  Increase in Savings and Investment
  8. 8. DISADVANTAGES:  Entry of MNC supermarket and hypermarket chains would cause severe displacement of small and unorganised shopkeepers and traders  Large giants of the world try to monopolise and take over the highly profitable sectors.  Such foreign companies invest more in machinery and intellectual property than in wages of the local people.
  9. 9. INDIA FDI And
  10. 10.  It was introduced in 1991 under Foreign Exchange management act  Welcomes FDI , but it is not permitted in sectors like arms & ammunition, Atomic, Railways,coal mining and many more.  In certain sectors some restriction are put as in Insurance companies(26%). ,.
  11. 11. TOP 5 COUNTRIES FOR FDI INFLOW IN INDIA Column1 Mauritius Singapore UK Japan U.S
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