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GROUP NO: 2
Merits & demerits of FDI on developing
economies

Anurag Bisen
Hitesh Jain
Abhishek Kar
Rohit Mahind
Foreign Direct Investment
An investment made by a company or
entity based in one country, into a company
or entity based in another country.
•
•
•
•

Greenfield investment
Brownfield investment
Mergers & acquisitions
Joint ventures

The Puzzles of Central and Eastern Europe Transformation and Integration

Forms of FDIs

ECES, Prague
Why FDI?
• Industrial competitiveness

• Transportation cost is high
• Location specific advantages for resources

• Market imperfection
• Product life cycle for imported products
• Trade barriers
• Need to protect Technological know how
At the early
stage FDI
Positive
• Structural changes
accelerates
Negative
• No immediate growth
generation
• Foreign trade gap may
widen
• Restructuring fosters
unemployment

At the Mature
stage
Positive
• Higher rate economic
growth
• More export and
Improving trade balance
Negative
• Profit return increases
• Lower tax collection as a
result of tax
Merits of FDI on developing
economies
• No debt creation on the part of the government.
• Assists Human capital formation.
• Increases productivity and competitiveness.
• Exports promotion
• Domestic capital is inadequate
• Foreign capital brings rare elements like technical
know-how, business expertise & knowledge.
Merits of FDI on developing
economies
• Farmers get a better price
• Influx of capital & rise in tax revenue
• Increases employment
• In case of India
Demerits of FDI on developing
economies
•
•
•
•

Sword on small retailers, shopkeepers.
Monopoly creation
Colonialism
Adverse effect on capital A/C due to outflow of
capital
• FDI in retail: hits to unorganized retailers
• Low income group may not afford the increased
price
• Inflation may rise
- TESCO in India with TRENT of Tata
Jet – Etihad deal

Tata – SIA deal
FDI IN DEVELOPING NATIONS

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FDI IN DEVELOPING NATIONS

  • 1. GROUP NO: 2 Merits & demerits of FDI on developing economies Anurag Bisen Hitesh Jain Abhishek Kar Rohit Mahind
  • 2. Foreign Direct Investment An investment made by a company or entity based in one country, into a company or entity based in another country.
  • 3. • • • • Greenfield investment Brownfield investment Mergers & acquisitions Joint ventures The Puzzles of Central and Eastern Europe Transformation and Integration Forms of FDIs ECES, Prague
  • 4. Why FDI? • Industrial competitiveness • Transportation cost is high • Location specific advantages for resources • Market imperfection • Product life cycle for imported products • Trade barriers • Need to protect Technological know how
  • 5. At the early stage FDI Positive • Structural changes accelerates Negative • No immediate growth generation • Foreign trade gap may widen • Restructuring fosters unemployment At the Mature stage Positive • Higher rate economic growth • More export and Improving trade balance Negative • Profit return increases • Lower tax collection as a result of tax
  • 6. Merits of FDI on developing economies • No debt creation on the part of the government. • Assists Human capital formation. • Increases productivity and competitiveness. • Exports promotion • Domestic capital is inadequate • Foreign capital brings rare elements like technical know-how, business expertise & knowledge.
  • 7. Merits of FDI on developing economies • Farmers get a better price • Influx of capital & rise in tax revenue • Increases employment • In case of India
  • 8. Demerits of FDI on developing economies • • • • Sword on small retailers, shopkeepers. Monopoly creation Colonialism Adverse effect on capital A/C due to outflow of capital • FDI in retail: hits to unorganized retailers • Low income group may not afford the increased price • Inflation may rise
  • 9. - TESCO in India with TRENT of Tata Jet – Etihad deal Tata – SIA deal

Editor's Notes

  1. Around 35% of the total produce gets spoiled….so FDI is good
  2. TESCO invested in machinery & productoin