Foreign direct investments (FDI) are investment of foreign assets into domestic structures, equipments and organization. FDI reflects the objectives of obtaining a lasting interest by a resident entity in one economy (Direct Investor) in entity resident in an economy other than that of the Investor (Direct investments enterprise). The lasting interest implies the existing of a long-term relation between the direct investor and the enterprise and a significant degree influence on the management of the enterprise. Direct investment involves both the initial transaction between the two entities and all the subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated.
Most of the developing countries suffer from low level of income and low level of capital formation. However, despite this shortage of capital, these countries have developed a strong urge for industrializing and economic development. Consequently, they have embarked upon large-scale programs of industrialization. Since the domestic resources to carry out such programs have been entirely in adequate, these countries have had to depend on foreign capital
Foreign capital takes two main forms – private foreign investments and foreign aid. Private foreign investment as far as FDI is concerned, the private foreign investor either sets up a branch or a subsidiary in the recipient country. Of particular importance has been the increasing role of the multi-national corporations (MNCs) in the underdeveloped countries. These MNCs have set up a large number of branches and subsidiaries in these countries and have bought with them new technological expertise, machinery and equipment, better management and organization, superior marketing techniques etc.
Indirect foreign investment or portfolio investment takes place when the nationals (includes foreign institutional investors) (FIIs) of one-country purchase shares or debentures floated by industries in some other countries (operating in the stock market).
[...] If there is any transfer of existing shares from any resident or non resistant holder, it requires government approval that is followed by the approval from the Reserve Bank of India 1.5 EVOLUTION OF FDI IN INDIA Post 1948, the industrial policy announced by the government of India focused on the industrial growth and the overall development of the nation. The primary trust was given in the areas of consistent increase in production and a fair and equitable distribution of food grains. [...]
[...] Interpretation of Industrial Development before and after introducing FDI in India It was by the P.V.Narasimha Rao, the Prime Minister of India in 1991 and by Man Mohan Singh the Finance Minister of India in 1991, passed the act of LPG (Liberalization, Privatization and Globalization). From 1991 the actual inflow of FDI started in India. Before independence for a long period of time, FDI was used by colonial powers to exploit Indian resources. Till 1968 India was positively receptive of FDI because India lacked significantly in capital, technology, skills and entrepreneurship. [...]
[...] The organized sector of the Pharmaceutical industry has played a key role in promoting and sustaining development in this vital field international companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past fifty three tears and helped to put India on the pharmaceutical map of the world. The overall flow of FDI approved in chemicals sector is received Rs 3376.9 crore in 1997, which constitute 23% of total flows for the period. Chemicals have received around in 2000 in which drugs and Pharma alone received highest proportion Chapter Conclusion The foreign direct investment has been allowed in various sectors of industries. [...]
[...] The US and Canada were among the few countries that had private ownership of telecom and both had strict limits on foreign ownership Role of FDI in India In case of India, the role of FDI in easing financial constraints becomes critical. According to planning commissions, at current levels of efficiency in the economy, the increase in the investment needed to achieve the overall growth in Telecom Sector. Since this addition to investment cannot come entirely from domestic sources, a substantial portion will have to be funded through FDI. [...]
[...] Quite interestingly ‘Broad banding' services were launched by BSNL and MTNL with a speed of 256 caps at the cost of Rs 500 per month and the FDI ceiling enhanced to 74% from 49% on Feb As on April 14,2005 telephone connections crossed the 100 million India Chapter Conclusion The Finance Ministry has claimed in his budget 2005-2006 speech that unless FDI limits are lifted, huge investment of Rs 1,60,000 crore cannot be made. Whereas, it is clear that the internal resources generated by the Indian telephone companies (Public and Private) are quite adequate to meet the needs of the sector. [...]
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