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.
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.
• Inflow of equipment and technology
• Competitive advantage & innovation
• Financial resources for expansion
• Employment generation
• Contribution to exports
• Crowding of local industry.
• Conflicts of laws
• Effect on natural environment
• Loss of control
• Effect on local culture
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
by incorporating a wholly owned subsidiary or company
Low corporate tax and individual income tax rates
Other types of tax concessions
Special economic zones
Epz – export processing zones
Investment financial subsidies
Soft loan or loan guarantees
Free land or land subsidies
Relocation & expatriation
Derogation from regulations (usually for very large projects)
Profitability: Attract where return on investment is
Costs of production: Encouraged by lower costs of
production like raw materials, labor .
Economic Conditions: Market
potential, infrastructure, size of population, income
Government policies: Policies like foreign
collaboration, remittances, profits, taxation, foreign
exchange control, tariffs etc.
Political factors: Political stability, nature of important
political parties and relations with other countries.
• 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
• 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.
• At least 10% of shares of Co; needed to qualify
• 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.