The word foreign investment in Indiamay be very familiar considering the modern-day economy but most of the people do not know much about FDI. As it is evident from the term FDI, this is the process of investing into another foreign nation by any individual, a group of company or an association. This is done in a setup of an association or a company and even as mergers in a foreign nation. The tool of foreign direct investment in the modern economy is very significant as it plays an instrumental role in creating a harmony in the global world of investment into different businesses.
A parameter for policy making
Whether you consider foreign investment in India or in any other country for that matter, FDI acts as the major parameter for investment flow from a specific country to another. It is also the major tool for policy formulation and is considered an important parameter of the economics and politics of the world. Today the corporations have a tremendous GDP and there is a significant shift in the military powers seen to the economic power after 1950’s. With the large corporations taking over the country’s economy, they have been able to influence both politics and policy formulation.
Expanding to overseas market
The most significant benefit that foreign direct investmenthas brought to the countries is that they can now extend and expand their market easily overseas. With its immense opportunities it has given the developed countries the power to make sure that their factories keep on running even during a rundown in the economy. It has enabled them to earn more returns on their investments. On the other hand, it has also enabled the corporations to kick-start economic activities to tap the huge natural, human, geographic and technological resources. It has ideally created an opportunity for the investors as well as the ultimate consumers to reap the benefits.
Right from the very outset, fdi in India has been largely been treated as the indicator of economic growth as it is in other countries. Governments used FDI to ensure economic well-being of this country with an intention to propagate the idea of FDI into the minds of the common people. However, as per the economists, it is the numerous factors that needs to be taken into account before the government considers this move to be an achievement. This is because the tragic incident of the 1984 Bhopal Gas tragedy points out the weak and corrupt regulation and mismanagement. It also shows the deep hunger of the powers that be to reap bigger profits from export accounts at the cost of poor countrymen.
The political aspect
With an increased interest among the people outside the country to make foreign investment in Indian companywarrants for a critical assessment of it under different critical heads. This is all the more important because foreign direct investment has not only taken up the Indian economy but has also influenced the Indian society at different levels. If you consider the political scenario of today, you will notice that like in all other countries here too there is integration of liberalization, globalization and privatization in Indian culture, polity and society. The political decisions taken in this regard plays a critical role in the creation and adoption of different measures and its implementation in some of the major parts.
Reasons for allowing
The Indian society and polity have embraced foreign direct investment as they say, ‘with open arms.’ This is because foreign direct investment allows mutual cooperation between two countries, it creates a lot of job opportunities, and promotes sharing of governmental aids between the two nations. It also results in the ease of the peace political cooperation, visa-based regulations, weaker and inefficient public sector undertaking and in administration and politics. It helps the two countries to build a trade friendly relationship that will help both to derive a privileged status.
Economic and social aspects
Last but not least, FDI also affects the economic as well as the social aspects of the participating countries. It allows easy and more active transfer of funds and finances that helps to keep up with the prevalent trends of international business. It also contributes to the cultural induction and social norms.