FDI is a source of modernization, economic development, and employment where technology spillovers help contribute to the international trade integration as well as exports. It helps create more competitive business environment that enhances the development of enterprise and increases the total factor productivity.
FDI has helped India rocket from less than US $2 billion in 1991 to more than US $45 billion in 2005. The role that FDI has played in the overall enhancement of the Indian economy has brought about a great deal of advancements to the Indian economy.
With more and more powerful investors making their way into the Indian economy, the economy has stood a strong ground and enhanced overall with the right tools and managed to give a boost to India’s development spree.
Foreign Investment is of two types:
(1). Direct Investment-The Investment done by the sub-division of over-seas organization, investment by subordinates of over-seas organization and investment by other foreign-regulated companies.
(2). Portfolio Investment– The assets governed by non-residents in the host country’s joint-stock companies, credit capital from dedicated source overseas invested in host country’s companies and credit capital from authoritative origin in host country’s joint stock companies.
One of the most important characteristic of international finance is the investment by a discrete body or an organization from other countries. This inflow of international finance may turn up to become direct investment (formation of high-yielding facilities) or portfolio investment (accession of certainty).
FDI is the product of the shared concern of international corporation and destination countries. According to the International Monetary fund, FDI is defined as “investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor. The investor’s purpose being to have an effective voice in the management of the enterprise.” It can be defined as the investments made to acquire lasting interests in enterprises operating outside of the economy of the investor.
FDI is an enterprise management technique through which a company obtains dynamic benefits in another country. It is a reference to compute foreign-owned firms of dynamic benefits, such as business units, mines and land. Escalating foreign investment can be considered as a measuring reference of economic internationalization. The transference of package of funds, human resource, and technical competence is the prime substance of FDI. FDI is considerate form of prolong process of international capital inflow build for the motive of dynamic benefits and escorted by the intention of management oversight or involvement in the administration of international companies.