Foreign Direct Investment (FDI) in India

Foreign Direct Investment (FDI) in India Alok Tyagi QUESTION Discuss the significance of foreign direct investment for a developing country like India? Why India has failed to attract more FDI despite being a democratic country? WHAT IS FOREIGN DIRECT INVESTMENT? MEANING: These three letters stand for direct investment. The simplest explanation of FDI would be a direct investment by a corporation in a commercial venture in another country. A key to escaping this action from investment in other ventures in a foreign country is that the business enterprise operates completely outside the economy of the corporation’s home country. The investing corporation must control 10 percent or more of the voting power of the new venture. According to history the United States was the leader in the FDI activity dating back as far as the end of World War II. Businesses from other nations have taken up the flag of FDI, including many who were not in a financial position to do so just a few years ago. The practise has grown significantly in the last couple of decades, to the point that FDI has generated quite a bit of opposition from groups such as labor unions. These organizations have expressed concern that investing at such a level in another country eliminates jobs. Legislation was introduced in the early 1970s that would have put an end to the tax incentives of FDI. But members of the Nixon administration, Congress and business interests rallied to make sure that this attack on their expansion plans was not successful. One key to introducing FDI is to get a mental picture of the global scale of corporations able to make such investment. A carefully planned FDI can provide a huge new market for the company, perhaps introducing products and services to an area where they have never been available. Not only that, but such an investment may also be more profitable if construction costs and labor costs are less in the host country. The definition of FDI originally meant that the investing corporation gained a significant number of shares (10 percent or more) of the new venture. In recent years, however, companies have been able to make a foreign direct investment that is actually long-term management control as opposed to direct investment in buildings and equipment. Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply. Foreign direct investment (FDI) refers to long-term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow(positive or negative). Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one country (‘direct investor’) in an entity resident in an economy other than that of the investor (‘direct investment enterprise’). Foreign Direct Investment – when a firm invests directly in production or other facilities, over which it has effective control, in a foreign country. Manufacturing FDI requires the establishment of production facilities. Service FDI requires building service facilities or an investment foothold via capital contributions or building office facilities. Foreign subsidiaries – overseas units or entities Host country – the country in which a foreign subsidiary operates. Flow of FDI – the amount of FDI undertaken over a given time. Stock of FDI – total accumulated value of foreign-owned assets Differs from FDI, which is the investment in physical assets. DEFINITION Foreign direct investment is that investment, which is made to serve the business interests of the investor in a company, which is in a different nation distinct from the investor’s country of origin. A parent business enterprise and its foreign affiliate are the two sides of the FDI relationship. Together they comprise an MNC. The parent enterprise through its foreign direct investment effort seeks to exercise substantial control over the foreign affiliate company. ‘Control’ as defined by the UN, is ownership of greater than or equal to 10% o ordinary shares or access to voting rights in an incorporated firm. For an unincorporated firm one needs to consider an equivalent criterion. Ownership share amounting to less than that stated above is termed as portfolio investment and is not categorized as FDI. 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. It does not include foreign investment into the stock markets. 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 first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly. FDI or Foreign Direct Investmentis any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. FDIs require a business relationship between a parent company and its foreign subsidiary. Foreign direct business relationships give rise to multinational corporations. For an investment to be regarded as FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. FOREIGN DIRECT INVESTOR A foreign direct investor is an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related incorporated and unincorporated enterprise – that is, a subsidiary, associate or branch – operating in a country other than the country or countries of residence of the foreign direct investor or investors. TYPES OF FOREIGN DIRECT INVESTMENT FDIs can be broadly classified into two types: Outward FDIs Inward FDIs This classification is based on the types of restrictions imposed, and the various pre-requisites required for these investments. Outward FDI: An outward-bound FDI is backed by the government against all types of associated risks. This form of FDI is subject to tax incentives as well as disincentives of various forms. Risk coverage provided to the domestic industries and subsidies granted to local firms stand in the way of outward FDIs, which are also known as ‘direct investments abroad’. Inward FDI: Different economic factors encourage inward FDIs. These include interest loans, tax breaks, grants, subsidies, and the removal of restrictions and limitations. Factors detrimental to the growth of FDIs include necessities of differential performance and limitations related with ownership patterns. Other categorizations of FDI Other categorizations of FDI exist as well. Vertical Foreign Direct Investment takes place when a multinational corporation owns some shares of a foreign enterprise, which supplies input for it or uses the output produced by the MNC. Horizontal foreign direct investments happen when a multinational company carries out a similar business operation in different nations. Horizontal FDI – the MNE enters a foreign country to produce the same products at home. Conglomerate FDI – the MNE produces products not manufactured at home. Vertical FDI – the MNE produces intermediate goods either forward or backward in the supply stream. Liability of foreignness – the costs of doing business abroad resulting in a competitive disadvantage. METHODS OF FOREIGN DIRECT INVESTMENTS The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods: By incorporating a wholly owned subsidiary or company By acquiring shares in an associated enterprise Through a merger or an acquisition of an unrelated enterprise Participating in an equity joint venture with another investor or enterprise Foreign direct investment incentives may take the following forms: Low corporate tax and income tax rates Tax holidays Other types of tax concessions Preferential tariffs Special economic zones Soft loan or loan guarantees Free land or land subsidies Relocation expatriation subsidies RD support Infrastructure subsidies WHY IS FDI IMPORTANT FOR ANY CONSIDERATION OF GOING GLOBAL? The simple answer is that making a direct foreign investment allows companies to accomplish several tasks: Avoiding foreign government pressure for local production. Circumventing trade barriers, hidden and otherwise. Making the move from domestic export sales to a locally-based national sales office. Capability to increase total production capacity. Opportunities for co-production, joint venture with local partners, joint Marketing arrangements, licensing, etc. A more complete response might address the issue of global business partnering in very general terms. While it is nice that many business writers like the expression, ‘think globally, act locally’, this often used clichà © does not really mean very much to the average business executive in a small and medium sized company. The phrase does have significant connotations for multinational corporations. But for executives in SME’s, it is still just another buzzword. The simple explanation for tis is the difference in perspective between executives of multinational corporations and small and medium sized companies. Multinational corporations are almost always concerned with worldwide manufacturing capacity and proximity to major markets. Small and medium sized companies tend to be more concerned with selling their products in overseas markets. The advent of the internet has ushered in a new and very different mindset that tends to focus more on access issues. SME†™s in particular are now focusing on access to markets, access to expertise and most of all access to technology. THE STRATEGIC LOGIC BEHIND FDI Resources seeking – looking for resources at a lower real cost. Market seeking – secure market share and sales growth in target foreign market. Efficiency seeking – seeks to establish efficient structure through useful factors, culture, policies or markets. ENHANCING EFFICIENCY FROM LOCATION ADVANTAGES Location advantages – defined as the benefits arising from a host country’s comparative advantages. Lower real cost from operating in a host country Labour cost differentials Transportation costs, tariff and non-tariff barriers Governmental policies IMPROVING PERFORMANCE FROM STRUCTURAL DISCREPANCIES Structural discrepancies are the differences in industry structure attributes between home and host countries. Examples include areas where: Competition is less intense Products are in different stages of their life cycle Market demand is unsaturated There are differences in market sophistication INCREASING RETURN FROM OWNERSHIP ADVANTAGES Ownership advantages come from the application of proprietary tangible and intangible assets in the host country. Reputation, brand image, distribution channels Technological expertise, organizational skills, experience Core competence – skills within the firm that competitors cannot easily imitate or match. ENSURING GROWTH FROM ORGANIZATIONAL LEARNING MNEs exposed to multiple stimuli, developing: Diversity capabilities Broader learning opportunities Exposed to: New markets New practices New ideas New cultures New competition FDI INDIAN ECONOMY The economy of India is the third largest in the world as measured by purchasing power parity, with a gross domestic product (GDP) of US $3.611 trillion. When measured in USD exchange-rate terms, it is the tenth largest in the world, with a GDP of US $800.8 billion. The economy is diverse and encompasses agriculture, handicrafts, textile, manufacturing and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are growing sector and are playing an increasingly important role of India’s economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important ‘back office’ destination for global companies or the outsourcing of their customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the government activities that require an Industrial License. INVESTMENT RISKS IN INDIA Sovereign Risk Political Risk Commercial risk Risk due to terrorism FDI POLICY IN INDIA Foreign Direct Investment policy FDI policy is reviewed on an outgoing basis and measures for its further liberalisation are taken. Change in sectoral policy/sectoral equity cap is notified from time to time through press notes. FDI policy permits FDI up to 100% from foreign investor without prior approval in most of the sectors including the services sector under automatic route. FDI in sectors under automatic route does not require any prior approval either by the government or the RBI. The foreign direct investment scheme and strategy depends on the respective FDI norms and policies in India. The FDI policy of India has imposed certain foreign direct investmentregulations as per the FDI theory of the government of India. These include FDI limits in India for example: Foreign direct investment in India in infrastructure development projects excluding arms and ammunitions, atomic energy sector, railway system, extraction of coal and lignite and mining industry is allowed upto 100% equity participation with the capping amount as Rs. 1500 crores. FDI limit of maximum 49% in telecom industry especially in the GSM services. FDI figures in equity contribution I the finance sector cannot exceed more than 40% in banking services including credit card operations. Foreign direct investment: Indian scenario FDI is permitted as under the following forms of investments – Through financial collaborations Through joint ventures and technical collaborations Through capital markets via Euro issues Through private placements or preferential allotments CONCLUSION A large number of changes that were introduced in the country’s regulatory economic policies heralded the liberalization era of the FDI policy regime in India and brought about a structural breakthrough in the volume of FDI inflows into the economy maintained a fluctuating and unsteady trend during the study period. It might be of interest to note that more than 50% of the total FDI inflows received by India, came from Singapore and the USA. According to findings and results, we have concluded that FII did have significant impact on Sensex but there is less co-relation with Bank and IT. One of the reasons for high degree of any linear relation can also be due to the simple data. There are other major factors that influence the bourses in the stock market.

Unit 4 Per Diary Task

Unit 4 Practice Evidence Record Diary 4. 1-  During my time at placement I have had to encourage children to use resources in a safe and controlled way. For example while working outside in the settings back garden the children wanted to play on the slide. For children to be playing on the slide they will need to climb up from the one side where there are steps. However I made sure that I was close by in case a child injures themselves.While supporting the children I also allow myself to encourage the children to hold onto the handrail allowing them to have a steady balance, preventing them from falling. Due to keeping children safe and secure I am able to acknowledge that I am suppose to be asking the children not to run to fast and ensure that I am providing positive instructions for example to take turns on the slide allowing all the children to have a chance in playing on the slide I also supervised the children during the activity to make sure they were safe.It states in Tasso ni. P ^et al^ Heinemann 4th edition child care and education cache level 3 that P. Tassoni, 2007, page, 218 says  Ã‚  health and safety policy- this will give guidelines on how to keep children, parents and staff safe, for example guidelines on handing over children at the end of a session safely. However this practice shows that I am able to follow all policies and procedures such as the Health and Safety Work Act 1974 or the Equal opportunity policy.

Macroeconomics Homework

One of the possible characteristics of the UK national daily newspaper would be the tight competition that exists in the said market due to the availability of the large number of newspaper companies. This characteristic of UK national newspaper causes tight market competition among its member firms. Another characteristic would be the difficulty of market entry in the said industry. This can be attributed to the large number of newspaper companies that already exist in the market. Price competition serves to be one of the major factors that attract more customers based on the given case. Moreover, innovation is also vital to the newspaper industry of UK since newspaper readers now prefer newspapers in a form of either tabloid or any other style that is much different from the conventional broadsheet from of UK’s newspaper. Using the theory of oligopoly, discuss why the Guardian chose to launch a new design of paper in 2005. Read also  Homework Solutions – Chapter 3 On the other hand, the reason why The Guardian launched a new design of newspaper mainly because they have to go with the flow on what other companies has been doing into their products. It was identified that almost all of the competitors of The Guardian has already been shifted from their conventional broadsheet newspapers to smaller design of newspapers like tabloid. One characteristics of Oligopoly would be the fact that any action of one firm in the market may it be price or marketing strategy, always affects other players on the said industry (Tutor2u.com 2007: 1). The fact that The Guardian was forced to make new designs for its newspaper would necessarily mean that they were affected by the strategies of their competitors of transforming the size of their newspapers. Moreover, based on the case, price only matters less or only among the many factors that affects the demand of newspaper readers which is also a part of the traits of Oligopoly. Works Cited Tutor2u.com (2007). Oligopoly [online]. Available: http://tutor2u.net/economics/content/topics/monopoly/oligopoly_notes.htm [Accessed

The Importance of Language and Culture - 2130 Words

The Importance of Language and Culture Diana Everett COM200 Instructor Terrance Frazier April 04, 2011 The Importance of Language and Culture There are two forms of communications--verbal and non-verbal. Nonverbal communication is usually understood as the process of communication through sending and receiving wordless messages. Language is not the only source of communication, there are other means also. Messages can be communicated through gestures and touch, by body language or posture, by facial expression and eye contact. Meaning can also be communicated through object or artifacts (such as clothing, hairstyles or architecture), symbols, and icons (or graphics). Speech contains nonverbal elements known as paralanguage,†¦show more content†¦Language is more than just a means of communication. It influences our culture and even our thought processes. Language is arguably the most important component of culture because much of the rest of it is normally transmitted orally. It is impossible to understand the subtle nuances and deep meanings of another culture without knowing its language well. Differen t languages are easier to learn at a younger age before completely understanding a first language. Trying to learn a second language can be difficult for an adult, because the language they speak can confuse them while trying to learn. Different languages come from different backgrounds and when crossed can lead to great misunderstanding between the two languages. Anthropologists have found that learning about how people categorize things in their environment provides important insights into the interests, concerns, and values of their culture(Oneil, 2006). Language determines the way a person reviews the world. One’s culture determines the way one processes information and how one copes with reality. Concepts and objects have frames of reference that differ from culture to culture. 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