FDI - foreign direct investment


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FDI - foreign direct investment

  1. 1. FDI is a direct investment into production or business in a country by an individual or company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.
  2. 2. Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI. Platform FDI Foreign direct investment from a source country into a destination country for the purpose of exporting to a third country. Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.
  3. 3. • Inflow of equipment and technology • Competitive advantage & innovation • Financial resources for expansion • Employment generation • Contribution to exports Advantages
  4. 4. • Crowding of local industry. • Conflicts of laws • Effect on natural environment • Loss of control • Effect on local culture
  5. 5. The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods:  by acquiring shares in an associated enterprise  through a merger or an acquisition of an unrelated enterprise  participating in an equity joint venture with another investor or enterprise  by incorporating a wholly owned subsidiary or company anywhere
  6. 6.  Low corporate tax and individual income tax rates  Tax holidays  Other types of tax concessions  Preferential tariffs  Special economic zones  Epz – export processing zones  Bonded warehouses  Maquiladoras  Investment financial subsidies  Soft loan or loan guarantees  Free land or land subsidies  Relocation & expatriation  Infrastructure subsidies  R&d support  Derogation from regulations (usually for very large projects)
  7. 7.  Profitability: Attract where return on investment is higher  Costs of production: Encouraged by lower costs of production like raw materials, labor .  Economic Conditions: Market potential, infrastructure, size of population, income level etc  Government policies: Policies like foreign investment, foreign collaboration, remittances, profits, taxation, foreign exchange control, tariffs etc.  Political factors: Political stability, nature of important political parties and relations with other countries.
  8. 8. • We are the second highest producer of fruits and vegetables in the world but still we are not able to utilize is properly because of inadequate infrastructure facilities. • It will reduce pre-harvest wastage/losses and thus help control food inflation. • It will create 1.5 million more jobs in 5 years. Apart from the huge number of indirect employment. • It will increase competition which is always beneficial for the customer. • It will remove the middleman from the equation. It will reduce costs which in turn will reduce prices.
  9. 9. • At least 10% of shares of Co; needed to qualify as FDI. • Mauritius has been the largest direct investor in India.(US$20 billion) • The United States is the second largest investor in India.(US$6 billion) • U.S is the worlds largest recipient of FDI.
  10. 10. By vishal rana Contact- Email- vishalrana2690@gmail.com Twitter- @vishalrana2690 Facebook- www.facebook.com/vishal.rana.rana.vishal