F or ei gn Direct Invest ment - A catalyst for Ec onomic Development of India Binit Kumar , Pillai HOC College of Arts Science and Commerce, Rasayani Economic growth of a country is determined by the rate of investment .Countries with high growth rate invest a considerable fraction of their GDP and on contrary the slowly developing countries are those who fail to invest. It is evident that investment is a vital component ofeconomic growth. Economists define the investment as the source of production of goods that will be used to produce othe r goods. It is a fact that economists hav e developed a common opinion about the constructive effect of investment on economic growth. Yet no consensus is built that eitherpublic investment has a superior impact on economic bustle o r private investment. Empirical evidence from all over the globe proposes that private capital is more fruitful than public investment. Foreign Capital flows can be categorised into one of the following category!. Commer cial " oan are in the for m of loan fr om for eign en tity to busi ness or government #. $ffici al Flow ar e the assist ance from % orl d &an'( I)F or other dev eloped count ries to developing Countries and "DC*s +. FPI Foreign Portfolio Inves tme ntare invest men t in instr ume nt which are easily tra ded( less per manen t( and do not hav e a con tr oll ing sta'e in enter pri se. In this cat egory investment are made via e,uity instruments -stoc'sor debt -bondsof foreign enterprise. /. FDI Forei gn Di rec t Investment Foreign dire ct inves tment -FDI is defi ned as an investment involving a long0term relationship and reflecting a lasting interest in and control by a resident entity in one economy -foreign direct investor or parent enterpriseof an enterprise resident in a different economy -FDI enterprise or affiliate enterprise orforeign affiliate. 1uch investment involves both the initial transaction between the two entities and all subse,uent transactions between them and among foreign affiliates. ! 2 1| P a g e
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Foreign Direct Investment- A Catalyst for Economic Development of India
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7/26/2019 Foreign Direct Investment- A Catalyst for Economic Development of India
Foreign Direct Investment- A catalyst for Economic
Development of India
Binit Kumar, Pillai HOC College of Arts Science and Commerce, Rasayani
Economic growth of a country is determined by the rate of investment .Countries with high
growth rate invest a considerable fraction of their GDP and on contrary the slowly developing
countries are those who fail to invest. It is evident that investment is a vital component of
economic growth.
Economists define the investment as the source of production of goods that will be used to
produce other goods. It is a fact that economists have developed a common opinion about the
constructive effect of investment on economic growth. Yet no consensus is built that either
public investment has a superior impact on economic bustle or private investment. Empirical
evidence from all over the globe proposes that private capital is more fruitful than public
investment.
Foreign Capital flows can be categorised into one of the following category
!. Commercial "oan are in the form of loan from foreign entity to business or government#. $fficial Flow are the assistance from %orld &an'( I)F or other developed countries to
developing Countries and "DC*s+. FPI Foreign Portfolio Investment are investment in instrument which are easily traded(
less permanent( and do not have a controlling sta'e in enterprise. In this category
investment are made via e,uity instruments -stoc's or debt -bonds of foreign enterprise./. FDI Foreign Direct Investment Foreign direct investment -FDI is defined as an
investment involving a long0term relationship and reflecting a lasting interest in and
control by a resident entity in one economy -foreign direct investor or parent enterprise
of an enterprise resident in a different economy -FDI enterprise or affiliate enterprise or
foreign affiliate. 1uch investment involves both the initial transaction between the two
entities and all subse,uent transactions between them and among foreign affiliates.! 2
1 | P a g e
7/26/2019 Foreign Direct Investment- A Catalyst for Economic Development of India
Foreign Direct Investment- A catalyst for Economic
Development of India
Binit Kumar, Pillai HOC College of Arts Science and Commerce, Rasayani
distribution among states by providing much freedom to states( so that they can attract FDI
inflows at their own level.
In India policy ma'ers are loo'ing at FDI as the primary source of funds( but they must be
consider that FDI is not the only solution of rapid growth and development. India needs to
put in place a comprehensive developmental strategy which must include being open to trade
both internal and e4ternal and FDI.
! definition as per >C5?D -nited >ations Conference on 5rade and Development# as per Department of Industrial Policy and Promotion )inistry of Commerce and IndustryGovernment of India Consolidated FDI Policy -Effective from ?pril !( #7!/+ 1ee Cohen et al.-!99 for a collection of 8ymer*s essays./ https33www.rbi.org.in31cripts3F?MBiew.asp4IdN#:
6eference
!. Effect of Foreign Direct Investment on Economic Growth in India ?n EmpiricalInvestigation by Dr. 1.?. 1aiyed( P?6IPEO 0 I>DI?> A$6>?" $F6E1E?6C8( Bolume ! Issue !! >ovember #7!#( I11> 0 ##@70!99!
/. Consolidated FDI Policy -Effective from ?pril !( #7!/ by Department of Industrial Policy and Promotion ( )inistry of Commerce and Industry (Government of India
@. Impact of Foreign Direct Investment on Indian economy by )ahanta Deva<it Research Journal of Management Sciences ,I11> #+!9K!!!( Bol. !-#( #90+!(1eptember -#7!#
. Impact of Foreign Direct Investment Inflows on the Growth of Indian EconomyDeepa' Qumar L ?nupam( International Aournal of 6esearch -IA6( Bolume0!(Issue0@( Aune #7!/