Foreign direct investment (FDI) refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, other long-term capital, and short term capital as shown in the balance of payments. 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) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.FDI is one example of international factor movements.
- causes a flow of money into the economy which stimulates economic activity
- Employment will increase
- Long run aggregate supply will shift outwards
-Aggregate demand will also shift outwards as investment is a component of aggregate demand
- it may give domestic producers an incentive to become more efficient
Cite this article:
Sunita Jain. Trends of Foreign Direct Investment in India. Int. J. Rev. and Res. Social Sci. 3(4): Oct. - Dec., 2015; Page 175-180.