How Does FDI Work?

Foreign direct investment is an investment made by an individual or a firm into the business of another counter. This entity is not a citizen of the country where the investment is being made. Overseas direct investment is not simply the transfer of funds, it is characterized by a notion of controlling ownership. It is thus distinguished by foreign portfolio investment by direct control.

How does foreign direct investment work?

When it comes to foreign direct investment everyone has an opinion. Which some feel that is important for the growth of the economy, other argue that it only makes the country more dependent.

However, it is a fact that overseas direct investment is a critical driver of economic growth. Apart from bringing an inflow of equity inflows, foreign direct investment bring in managerial expertise, technical know how, new job opportunities, improved infrastructure, and new technology.

Overseas investors can invest in India under two routes- the Automatic Route and the Government Route.

Under the automatic route, no prior government approval is required. That means that a foreign investor does not have to go through the government and different ministries to be able to make an investment in an India company. Under the government route however, a prior approval from the government is mandatory. Rules and regulations under the government route are more stringent as compared to the automatic route where they are relatively more relaxed.

Now, the entire process of finding the right investor for your business in India can be confusing. It can take you a lot of effort and even time, which is an expensive commodity in today’s time. The best solution is this case is to contact an FDI agency like us.

At FDI India, we facilitate foreign direct investment in India by bringing together opportunities and foreign investors. We effectively, with our services bridge the gap between investors and business looking for investments.

Raising money within the country is not easy. It comes with more hassle and complications. This is the reason why businesses turn towards foreign investors to kick start their businesses. The government also over the years have taken steps to regulate and reform foreign direct norm, making them easier in order to increase investment into the country.

Recently, the government passed regulations in foreign direct investment norms across several sectors such as digital media, contract manufacturing, single-brand retail, aviation, multi-brand retail, coal mining etc.

These regulations come after India witnessed a drop in foreign direct investment for the first time in 6 years. The 1 per cent drop motivated the government to step-up their game plan to attract more overseas investors into the country.