What is FDI?

What is FDI?  

FDI stands for Foreign Direct Investment.  Foreign direct investment happens when a company makes an investment in a foreign nation (a nation other than in which it is based) by buying another company / company’s asset or expands his business. The investment made through FDI becomes a source of external finance which could boost the economy of the nation where investment is made. Company who is  investing in other countries normally gets the benefits of low manpower cost, some tax exemptions,  lesser working capital, expansion of business and reach to the new markets.

Why there is so much of pull & push in India on this topic these days?

I feel that in India we are confused over the benefits and detriments of FDI.  Political parties  are using this issue for their personal short term benefits…..some of them are expecting profit in implementation  and others are in opposing.  Below are the basic pros and cons of FDI,  hope this will help you in making your view and stands.

Expected common Benefits

  • It  give strength to the economy.
  • Increase in employement becuase of new avenues
  • It could benefit farmers by eliminating middlemen
  • Consumers will be benefited by getting variety and low cost quality products
  • FDS – Food distribution system will improve
  • Competition in rates / Services / Quality is good for domestic market

 Expected problems / losses:

  • Small vendors and store owners will be negatively impacted because of big foreign players
  • Question on intention of the company. Possibility of import of raw materials / products from abroad which could lead to a threat to our expectation of increase in local jobs.
  • Above scenario is also a threat to local farmers.
  • Market prices could be manipulated by foreign retail giants
  • If FDI is not placed under better control by the government which can restrict some level of import and manpower management then it may not be beneficial for the country.

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3 Responses to What is FDI?


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