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FDI (Foreign Direct Investment)

August 10, 2009
Foreign direct investment is defined as a company from one country making a physical investment into building a factory in another country.
Foreign direct investment plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development.

Making a direct foreign investment allows companies to accomplish several tasks:
  • Avoiding foreign government pressure for local production.
  • Circumventing trade barriers, hidden and otherwise.
  • Making the move from domestic export sales to a locally-based national sales office.
  • Capability to increase total production capacity.
  • Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc;

  • In the last couple of months there has been a series of announcements of big investments by big foreign and NRI companies.
  • Bill Gates in his recent visit to India has announced that the Microsoft will invest around $ 1.7 billion over the next four years in India.
  • Intel the largest computer chips company of the world has decided to invest over $ 1 billion in India.
  • CISCO has announced plans to spend $ 1.1 billion over the next 3- 4 years in India.
BuTo be a genuine competitor of China in FDI, India should aim to an annual growth rate of 10 percent which the Indian Prime Minister Dr Manmohan Singh has also rightly pointed out recently. So far India has not attracted more then $ 3-4 Billion annually when compared to FDI inflows of $ 55- 60 Billion for China.
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