The Foreign Direct Investment

FDI stands for Foreign Direct Investment, a component of a country’s national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially “hot money” which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly. Foreign direct investment (FDI) is the after effect of globalization. From the 1990s onwards most of the developing countries have begun to carry out economic liberalization policies. That is, the governments of these countries started life insurance no exam to remove stringent and prohibitive legislations that prevented foreign firms to start business in these countries. Many countries started free trade areas with neighboring countries. These policy changes removed political and geographical constraints for doing business. In effect, this led to a situation where a successful business organization in a particular country can operate in any country in the world, if it wants to. The simultaneous emergence of internet as a global medium during that period acted as a catalyst for the process of globalization.  FDI in activities not covered under the automatic route according to para 1.3 above, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/foreign technical collaboration is also granted on the recommendations of the FIPB. Application for all FDI cases, except Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance. Application for NRI and 100% EOU cases should be presented to SIA in Department of Industrial Policy & Promotion. Applications can also be submitted with Indian Missions abroad who forward them to the Department of Economic Affairs for further processing. Application can be made in health insurance online Form FC-IL, Plain paper applications carrying all relevant details are also accepted. No fee is payable. When planning for a foreign direct investment, an organization should consider several factors: the track record and performance details of the subsidiary company, the political and investment climate of the country where the investment is going to be made, and a thorough cost-benefit analysis of the whole project. A case study on the progress of a similar investment will always help in decision-making. One has to also check for the future scenario like imminent elections and likely policy changes in a country before proceeding to invest in that country.

January 30, 2013iavalanche Comments Off on The Foreign Direct Investment
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