Foreign Direct Investment:
Foreign Direct Investment occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in other Country’s Company.
Advantages of FDI in India:
The Indian government made several reforms in the economic policy of the country in the early 1990s. This helped in the liberalization and deregulation of the Indian economy and also opened the country's markets to foreign direct investment.
As a result of this, huge amounts of foreign direct investment came into India through non- resident Indians, international companies, and various other foreign investors. The growth of FDI in India boosted the economic growth of the country.
Major advantages of FDI in India have been in terms of -
§ Increased capital flow.
§ Improved technology.
§ Management expertise.
§ Access to international markets.
Here is the limit of FDI inflows in various sectors in India:
1. Defence: 26%.
2. Insurance: 49%.
3. PSU: 49%
4. Single brand Retail: 51%.
5. Telecom: 74%.
6. Private Banking: 74%.
7. Civil Aviation: 74%.
8. Power: 100%.
9. Education: 100%.
10. Hospitals: 100%
11. Trading Companies: 100%.
12. Housing & Real Estate: 100%.
13. Drugs & Pharmaceuticals: 100%.
14. Roads, Highways, Ports & Harbors: 100%.
15. Pollution Control: 100%.
16. Call Centers & BPOs: 100%.
17. Small scale industries: 100%.
18. Oil Exploration: 100%.
19. Hotel & Tourism: 100%.
According to UNCTAD's World Investment Report 2009, India is among the world's 15 largest FDI recipient in 2008.
According to UNCTAD's World Investment Prospects Survey 2009-11, India has slipped by one notch to third position as the most preferred foreign direct investment (FDI) country. However, "These two largest emerging economies (China and India) ranked numbers one and three, respectively, as the most preferred FDI locations.
United States of America tops the list of FDI inflows in the world followed by United Kingdom.
