All About Foreign Direct Investment

Foreign direct investment is the process by which a country takes over the ownership of an organisation or business in another country. This in turn benefits the country where the investment takes place. Below are the benefits of FDI.

You've probably heard stories from your grandparents or parents about their youth. You could buy a complete meal for less than Rs. 3 - Watch movies starting at Rs. 2, and almost everything can be bought for Rs.100 However, things have changed. A bag of chips today costs Rs. You get 10 bags of chips, and more air than chips. You should think twice about ordering food. Inflation is something you must face. The only way to defeat it is to invest as soon as you can. This article outlines the benefits of foreign direct investment.

What's Foreign Direct Investment?

Foreign Direct Investment is often abbreviated to FDI. It refers to an investment made in one country by an individual or organisation into a business in another. Foreign direct investment is usually when foreign investors set up foreign business operations, or acquire foreign assets in a company. FDI allows an international company to directly participate in the daily operations of another country. FDI is more than just money. It also brings knowledge, technology and skills that can be used to create jobs.

What is the benefit of FDI?

Here are some of the main benefits of foreign direct investments in India

1. Economic development is stimulated by FDI

Large-scale economic growth is stimulated by FDI in India. It is the main source of foreign capital and a major contributor to increased revenues. This often leads to the opening of factories in countries of investment. In these factories, some local equipment, whether it is labour force or materials, can be utilised. Based on the skills of the employees, this process is repeated. People who work in large numbers have better lives and a higher standard of living. These people start to pay taxes which are then invested in the country's development.

2. FDI leads to increased employment opportunities

FDI can increase employment opportunities. When FDI is increased in a country, especially one that is developing, the nation's service and manufacturing sectors get a boost which leads to more jobs. The creation of employment leads to income for many. The income is then spent by the people, which increases a country's purchasing power.

3. The development of human resource is possible through FDI

FDI helps to develop human resources. Employees, also known by the human capital, receive adequate training and skills that help them to increase their knowledge. If you look at the impact of human resource development on the economy, it increases a country’s human capital ratio. The economy will benefit from more skilled resources, which can help train other people and have a positive ripple effect.

4. FDI increases a country’s technology and finance sectors

The process of FDI has been a success. The FDI process provides the country where the investment is taking place with many tools that they can use to their advantage. The recipient companies have access to the most recent tools in finance, technology, and operational practices when FDI is done. This introduction of new technologies and processes becomes more common in the local economy. It makes the fin-tech sector more efficient and productive.

Additional advantages

There are many other important points that we must not overlook, in addition to the ones mentioned above. FDI, for example, helps to develop a country’s backward regions and transforms it into an industrial center. FDI can be used to produce goods that are sold domestically as well as exported overseas, which creates another revenue stream. FDI improves a country’s exchange rate stability and capital inflow, as well as creating a competitive market.

As with any investment stream, there is a merit and a drawback to FDI. These are mostly geo-political. FDI, for example, can impact exchange rates, hinder domestic investment, and even cause political change. The benefits of FDI are clear to see.