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Foreign Direct Investment, commonly referred to as FDI is an investment made to acquire lasting or long-term interest in enterprises operating outside of the economy of the investor. It is not 'portfolio foreign investment (investment in another country's securities like bonds and stocks only for short term, mainly in order to gain profit)'. FDI involves the direct control of asset and equity so that they can participate in managerial decisions and influence the policy of company. FDI is long term in nature and regarded as better than foreign portfolio investment.
It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development.
Direct and Indirect Investment
Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise of both resident and non-resident investment. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be a cascading investment i.e. through multi-layered structure.
Genesis of FDI in India:
In India FDI follow two routes to enter in India:
In telecom sector FDI upto 49 % is permitted under automatic route while FDI more than 49 % to 100 % is permitted through FIPB route.
By: Parveen bansal ProfileResourcesReport error
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