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:

GREEN FIELD INVESTMENT	BROWN FIELD INVESTMENT
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.