Prelims level : Indian Economy Mains level : Paper - III Indian Economy
No Set Found with this ID

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.
Share Socially