What is the full form of FDI?
The full form of FDI is Foreign Direct Investment. It is the investment made in a corporation based in one nation into an organization based in other nation. It varies from the movement of the portfolio in which a multinational investor invests in the equities listed on a nation’s stock market. As the investor seeks to influence or control over such a company of a nation, it is simply called direct investment. Foreign direct investment is typically made at comparatively inexpensive rates in nations with open economies, high growth potential and qualified workers.
Various types of FDI
There are multiple kinds of FDI, two types of FDI frequently described are,
It relates to the FDI in which a foreign company invests in a country’s current business. It does not build a new office or manufacturing plant. To develop the existing company, it buys the current manufacturing plant in a region.
For instance, Vodafone acquired Hutch.
It corresponds to FDI where foreign corporation creates a new corporation as its branch rather than investing in an established company of a country.
For instance, Amazon, Google and Facebook.
Advantages of FDI
There are several advantages to FDI; a few of the main benefits are listed below:
- It creates jobs in the country.
- In the nation, it brings new capital
- Increases the country’s forex role
- In a nation, it carries new skills & technologies
- It increased prosperity & increases tax revenues
- It provides the investor company access to a nation’s international market,
- When wages are lower in the international target market, the investor organization may reduce production cost.
- The investor corporation can use a country’s natural resources, such as metals, fossil fuels, and so on.