The FDI in India refers to foreign direct investment or the indirect inflow of funds into an economy. It is also known as foreign direct investment or FDI. There are different kinds of FDI and all are helpful in different ways. The three major categories of FDI are capital goods, infrastructure development and software developed countries. Capital Goods includes sectors like oil and gas, chemicals, automobiles, etc which require very less investments.
Infrastructure development includes the improvement of roads, water systems, dams, communication links and so on. Software developed countries like India have a huge software development related industries. Capital goods imply physical developments like hotels, resorts, offices, shopping malls and the like. These can be done in any developing country irrespective of the economy. Hence it helps to bring down the dependency on outside help.
But it is difficult to predict and ensure the FDI. It depends a lot on the policies of the government of the country concerned. There are many parameters that can be used for the evaluation of the growth rates and the inflow and outflow of FDI. Some of the parameters are the cost of implementation, business environment, trade climate and the country's status in the international market. The policy and procedure of awarding permits to foreign institutions based on the FDI will also help in determining the FDI inflow and outflow.
Sometimes, projects undertaken by foreign nationals can become controversial, particularly when the local people are opposing the project. When this happens, the projects cannot get sanctioned and this results in a loss of a huge amount of investment which was expected in the first place. So, this kind of problem is also handled by the FDI. Sometimes, the economic policies of a country might change and this would create a negative impact on the FDI and hence the growth of the economy can also be affected.
The FDI can help to infuse new capital into the economy. This helps in improving the business conditions at the micro level. It also helps in improving the overall economic policy and procedures at the macro level. The flow of FDI enables businesspeople to invest their money in different business sectors and earn higher profits. Hence, it helps in generating employment for the locals as well as the foreigners. The employment generation leads to the rise in the FDI as companies utilize the skills of the local population in their respective fields of work.
The FDI also encourages small and medium scale businesses to expand their operations and take up bigger projects aimed at creating jobs and enhancing the FDI inflow. So, the overall FDI performance helps in promoting an open economy where businesses can flourish without any obstacles. Apart from creating jobs, FDI is instrumental in upgrading infrastructure in the developing areas. This helps . . . . . . the people living in the area to have access to basic necessities such as water, electricity, education and health care.
Since FDI comes in various sizes, it helps in promoting investment across all sizes of businesses and sectors. Therefore, it is helpful in promoting the development of the economy. With the help of the FDI, entrepreneurs are encouraged to start new ventures in different business segments. Businessmen are encouraged to set up small, medium sized and large businesses. There are projects aimed at building roads, setting up educational institutions, and training people who want to become self-employed.
For the overall FDI performance, the projects targeted at increasing the FDI inflow must be approved by the government before they can get started. There are many instances where the projects aimed at enhancing FDI growth are stalled due to lack of government support. However, with the right policies in place and a clear direction from the top, any business can successfully make use of the economic growth.