24, Jul 2018
Prelims level : Indian Economy Mains level : Paper - III Indian Economy
Why In News?
There has been 300% increase in FDI inflows in IT and 1TES in Karnataka and rebound in investment in Tamil Nadu.
What is FDI?
- Foreign direct investment, in which a Multi – national co-operation invest directly into the business of some other nation, mostly in developing countries.
- Green Field and Brown field are the two direct instruments of Investments.
- Other Investment are Foreign portfolio investment which is indirect in nature where a MNC or any other business invest in stock markets, equity shares etc.
Different Types of Investments:
|Invest in a new production place (land) and start a Business.||Invest in an already working or defunct production.|
Advantages of FDI:
- It is a long-term in nature as compared to FPI as the system involves investment in factors of production directly.
- Creates huge Employment but at the same time it is uncertain Example: Nokia production in plant in Sriperumbudur.
- It is a source for forex reserves as production happens in the investing nations.
Disadvantages of FDI:
- BEPS, results in shifting in profits via shell companies.
- No proper convention or laws to govern Goss border Corruption hence results in evasion.