Globalization entails the opening of our own economy towards
the world economy where the barriers and restrictions of
trade are eliminated and the governments are encouraging
private investment. The rapid growth of Asian economy is
the result of globalization where Foreign Direct Investment
(FDI) is playing an important role. The developing countries,
particularly in Asia have removed restrictions and implemented
policies to attract FDI inflows to benefit from the investments
and potential spillover effects. The governments of various
countries are taking appropriate steps to encourage FDI
that will maximize the significance for their economies.
FDI has enough potential to generate employment, enhance
exports and contribute to the long-term economic development.
FDI, according to IMF, is defined as "the investment
that is made to acquire a lasting interest in an enterprise
operating in an economy other than that of the investor.
The investor's purpose being to have an effective will in
the management of the enterprise".
FDI plays a pivotal role in the development of Indian economy.
It is an integral part of the global economic system. Significance
of FDI can be enjoyed to full extent through various national
policies and international investment architecture. Both
the factors contribute enormously to the maximum FDI inflows
into India, which stimulates the economic development of
the country. Attracting FDI has become an integral part
of the economic development strategies for India. The FDI
ensures production and generates varied employment opportunities
in the developing countries, which is a major step towards
the economic growth of the country. The FDI has been a booming
factor that has bolstered the economic life of India, but,
on the other hand, it is also being blamed for ousting domestic
inflows. The FDI is also claimed to have lowered a few regulatory
standards in terms of investment patterns. The effects of
FDI are by and large transformative. The incorporation of
a range of well-composed and relevant policies will boost
the profit ratio from FDI. Some of the advantages of FDI
enjoyed by India have been listed as under:
By raising the level of efficiency and the standards of
product quality, FDI makes a positive impact on the host
country's export competitiveness. It provides the host country
a better access to foreign markets due to international
linkages.This is one of the major sectors, which is enormously
benefited from FDI. A remarkable inflow of FDI in various
industrial units in India has boosted the economic life
of the country.
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