FOREIGN DIRECT INVESTMENT (FDI) : MEANING , EFFECT , NEEDS AND ROLE OF FDI .

        A country's economic growth depends on policies adopted by the government to facilitate investment , mainly in the economic and industrial sector. FDI has played a significant role in the rapid economic growth of the Southeast Asian countries and most notably China. India has embarked on an ambitious plan to emulate the success of her neighbours to the east and is trying bro sell herself as a safe and profitable destination for FDI.

       FOREIGN DIRECT INVESTMENT has become a key component of national development strategies for almost all the countries over the globe . FDI is considered to be an essential tool for jump- starting economic growth through its boostering of domestic capital , productivity and employment.

     The important effect of FDI is it's contribution to the growth big the economy . FDI has an impact on countries trade balance , increasing labour standards and skills , transfer of new technology and innovative ideas , improving infrastructure , skills and the general climate. 

    FDI is defined as "INVESTMENT MADE TO ACQUIRE LASTING INTEREST IN ENTERPRISES OPERATING OUTSIDE OF THE COUNTRY PF THE INVESTOR. " The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a Multinational Corporation (MNC) . In order to qualify as FDI the investment must afford the parent enterprise control over it's foreign affiliate. The UN defines control in this case as owing 10% or more of the ordinary shares ot voting power of an Incorporated firm or its equivalent for an unincorporated firm ; lower ownership shares are known as portfolio investment.

     FDI provides incentives that make different countries attractive bas FDI destinations. Various benefits could be : 

      1. Lowering of income and corporate taxes.

      2. Land , employment or infrastructural or financial subsidies.

      3. Research and development support.

      4. Relaxation in regulations.

      5. Tax holidays etc.

EFFECT OF FDI ON FUTURE OF INTERNATIONAL BUSINESS : 

     There would be both good and bad effects of FDI on the future of International Business. World would become a global village, and the world market would become beter , more competitive in terms of prices , availability and quality of product. The variety as will as help consumer to select from ample choices , which suits his preference and tastes, as well as suit hid pocket. The inclination of foreign investment is increasing towards developing Asian countries like India , China , Malaysia , Indonesia ,Brazil and other countries.

        Effect of FDI would be based on the host economies supplying technology transfer , management techniques etc . On one hand , it would increase the competition and employment but on the other hand, transmits the economic shocks across borders.

       International business would gain momentum by reducing costs of production , because of local availability of raw material , land , cheap labour , technology etc. It will help a firm enter new market to exploit it's potential and will also help the corporate sector to take advantage of relaxation in trade regulations and friendly political policies. This will not only improve international relations due to political collaboration but also help in a peaceful environment for the world.

       FDI will create more opportunities in I.B by creating demand in an authentic market by helping firms to diversify internationally and help in taking advantage of foreign exchange rates.

WHY INDIA NEEDS FDI ? 

      Economic growth is based on domestic savings. Fortunately , India's economic growth cover last decade and a half has primarily been driven by savings in the economy . But now-a-day' s Investment gap keep on increasing and this gap can be met by foreign flow.

FACTOR RESPONSIBLE FOR FDI IN INDIA :

       India is claimed to be the 10th largest economy across the globe and is ranked 3rd in the GDP in the entire Asia, which is one of the most significant factor responsible for FDI inflow in India. 

       India has a large reservoir of skilled labour at internationally most competitive cost and diversified manufacturing structure makes it easy to find partners for collaboration.

      The country has a vast scientific and technical manpower of over 20 million . The number of literates in India is more than the combined population of France and Japan.

      India has a vast domestic market of 300 million strong middle class population having a substantial purchasing power and another 700 million people whose capacity to purchase is gradually increasing.

ROLE OF FDI :

    FDIs role has been significant in the growth of a country's economy . Other roles of FDI are as follows: 

  1. It acts as a significant driver of development in poor nation.

  2. It increases the transfer of skills , technology and job opportunities.

  3. It helps the developing countries to have transparent and effective policy environment , for investment which helps in human resources as well as infrastructure development.

 4. It helps in technological advancement and outsourcing of knowledge , which helps in improving performance and quality of service of the human resources.

 5. Foreign firms going for joining ventures generally spent the major profit within the domestic market.

 6. Increases financial resources of a country , which helps in the development of the country.

Thanking you.