Foreign Direct Investment

Department of Promotion of Industry and International Trade (DPIIT) regulates Foreign Direct Investment (FEMA) in India through Foreign Exchange Management Act, 1999. So do you want to know how can you attract FDI in your business? Do you also want to receive hassle free foreign investment? If yes, then let us discuss.

FDI in layman language means investment by a foreign country individual/ firm/ company/ fund/ organization in another country with the aim to take over control/ management in the investee. For example – if a USA based company opens a business office in India, it will be considered FDI. This is the main difference between FDI and Foreign Portfolio Investment (FPI) as well. While in the former, taking direct ownership is present, in the latter, investment is done only in shares/securities of the investee. No ownership control is taken.

It was estimated that in the year 2022, United States of America was the top FDI destination worldwide. A country can increase its FDI flows by taking few measures such as:

  1. Ease of doing business.
  2. Allowing FDI under Automatic Route. For example- in India, there are few industries in which it is allowed 100% without government approval. These are- Medical devices, Thermal power, Retail Trading of food products, print media etc.
  3. Ease of compliances.
  4. Privatization policy of government.
  5. Taxation policy
  6. Market scenario
  7. Cost of production

More inflow means injection of more funds in the economy leading to more development. Hence, the governments of developing and under developed economies should focus on taking these steps for betterment.

Bhavya Taneja
Bhavya Taneja
Bhavya Taneja is a Practicing Company Secretary, speaker on various academic and non-academic topics and a writer. She has an experience of 8 years as a professional and 5 years as a faculty of Economics. She has authored a book of quotes called 'Crisp Talkings' and is actively involved in social welfare activities as well.

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