Foreign direct Investment is direct investment in productive assets by a company incorporated in a foreign country, as opposed to investment in shares of local companies by foreign entities. It is an important feature of an increasingly globalize economic system. A Foreign company is which has been from outside India and want to start business in India. Such companies have to follow the roles or the provisions of the Indian Companies Act, 1956 as far as the Indian business are concerned (Charles 2000).
According to Moosa (2002) Foreign Direct Investment (FDI) is the process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country).
Balasubramanyam (2004) says that even 10 years after launching Free market, Indian economy is still no were on the map when it comes to inviting foreign investment. Indian plan makers are working to their best to try to show the attractiveness of Asia’s third largest economy. There are many advantages in FDI as we can stable over external sector, over monetary and financial sector and also the corporate sector to face the challenges of the globalize economy.
As rightly said by Sukomal C Basu, Chairman & Managing Director, Bank of Maharashtra ; India is one of the top five economy in the world and has one of the finest GDP among developing countries, in purchasing terms. Since the economic reforms initiated in July 1991 which has generated numerous business opportunities, which has lead to closing of various with removal of most licensing procedures. Today almost all sectors have been opened to foreign investment and the government has promised to further opening of its foreign goods, services and investments. This move aims for faster and substantial economic growth.
“We have the required setup to absorb the kind of money coming from China as foreign direct investment.” as said by Nikhil Kharrau, CEO of Sun F&C Asset management , which has over ten billion rupees invested in Indian Markets.
Various analysts says that government must be aggressively privatization of state running firms, reforms of labor laws and cutting done on the huge debts and lowering of tariff which is among the highest in the world. The other hurdles is keeping the economy from realizing its potential and leaving the space for credit numbering agencies to improve India’s rating that are at scrap levels (Greenaway 2004).
India invites foreign investors to invest in the economy with some specific exceptions. The most important sector and also where we can improve are Information Technology, Telecommunication, Insurance and financial services, etc. The process of economic rules has made the Indian policy makers concentrate on attracting capital from outside India and making Indian a globalize industrial base. The result in inflow of foreign direct investment and technological transfer has created an atmospheric growth and has increased competitiveness of Indian industry.
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