FDI, as the word depicts is an investment plan done in a foreign country. This maybe from an individual or firm perspective. Basically FDI is when an investor starts foreign business in foreign country using foreign assets thus acquiring ownership and working with the interest rates of the foreign land.
FDI in India: India being a large and industrial hub has accommodated a lot of foreign companies. This has improved the country’s economic development. The FDI has also become India best source of income compare to the industries and companies in the country.
Foreign companies has embrace the idea of investing directly in the Indian economy. However the foreign investors have some benefits gained from investing in the private Indian businesses. The companies enjoy cheap wages and interest rates. This has also give positive impact to the Indian economy thus ranking the country among highly growing economies.
Digging deeper in the FDI this was officially embraced in the country in the year 1991. India was in deep economic crisis and here they allowed other foreign investment companies to enjoy business in their country. It has helped create jobs for many Indian citizens thus gaining skills and knowledge about the business.
What are the roles and advantages of FDI in India?
FDI plays a big role in the Indian economy as it:
- Enhances proper economic growth and development.
- It helps in the economy pace as it will help in the years to come. The generations will find already established economy due to foreign investments.
- The FDI only focuses on growth but doesn’t discriminate the people either by religion or race. All companies and the Indian people work together to build a strong nation.
- Individuals benefit more from the FDI as they get lowered risk.
FDI in retail sector India
With the great improvement in India economy, we have FDI to thank. They have taken the retail sector where the government gave a go ahead and 100 % FDI investment. This happened early in 2012 as before this time the retail sector investment was limited to 51%. This plan was to benefit both the investor and the consumers.
Reasons for FDI in retail
With the retail FDI the company will benefit from recent technology and supplementary funds. This makes India part of the global market and among the most developed countries.
Method of FDI investment and types of FDI
The investment can be established in different ways which include the subsidiary. Meaning you’re controlling interest of a company that has been there. We have different types namely:
Horizontal: refers to when the investor opens the same business in a foreign country as they have in their own country.
Vertical FDI investment: here the business are different but have same activities from the business in the foreign country.
Conglomerate: the investor makes totally different business from what they have at home. With this the investor looks for existing companies in the foreign country and learns plus joins the company to operate.