(FDI) and Trade FDI is an important factor in global economy. Foreign trade and FDI are closely related. In developing countries like India, FDI in the natural resource sector, including plantations, increases trade volume. Foreign production by FDI is useful to substitute foreign trade.
FDI is also influenced by the income generated from the trade and regional integration schemes. FDI is helpful to accelerate the economic growth by facilitating essential imports needed for carrying out development programmes like capital goods, technical know-how, raw materials and other inputs and even scarce consumer goods. When the export earnings of a country are not sufficient to finance for imports, FDI may be required to fill the trade gap. FDI is encouraged by the factors such as foreign exchange shortage, desire to create employment and acceleration of the pace of economic development.
Many developing countries strongly prefer foreign investment to imports. However, the real impact of FDI on different sections of an economy (say India) may differ. It could be a boon for some as well as bane for others. This may be discussed in the class – room.
Large demand for USD, generated by IMF and World Bank policies (FUND – BANK POLICIES), help the USD to gain value continuously. This is one of the hidden agenda of Fund – Bank policies. . .
Meaning of FDI FDI means an investment in a foreign country that involves some degree of An investment becomes foreign investment when.. Investment done by citizens and government of one country (home country) in industries of another country (host country). Foreign Investment through Foreign Direct Investments Foreign Institutional Investors - - International Economics control and participation in management. It corresponds to the investment made by a multinational enterprise in a foreign country.
It is different from portfolio investment, which is primarily motivated by short term profit and it does not seek management control. . . Objectives of FDI FDI has the following objectives.
. Sales Expansion . Acquisition of resources . Diversification .
Minimization of competitive risk. . . Advantages of FDI Foreign investment mostly takes the form of