Interest in others is the thing that ignites desires and goals. The interest of one person in another is important for a social circle and social empowerment. FDI is the interest of one country in another. If a foreign company acquires a voting right of ten per cent to a domestic company, both companies have lasting interest. FDI brings intra-organisational loans and borrowings. The reinvestment of profits or borrowings is also termed FDI. The movement of technology, skills, management and power that enhance the capital is FDI. FPI is a foreign portfolio investment which results in equity purchase. The difference between FDI and FPI is the interest and investment. FDI investments are of two types. Greenfield and brownfield investments differ in terms of control and expansion. The Greenfield investment is from the foundation and the subsidiary company has a high degree of control. The brownfield investment is for expansion. The Brownfield investment enhances joint ventures, acquisitions and mergers. In 2015, the global FDI stood at $ 1.8 TN. The blog highlights the advantages of FDI and the real-time data of the 2023 year.
Advantages of FDI:
FDI encourage technological development, entrepreneurship, start-up ideas, innovation and cross-cultural understanding. The following points elucidate the advantages of FDI.
FDI enhance employment opportunities. FDI offer job opportunities to the manufacturing and service sector. FDI has a big contribution to the service sector. Domestic investment is not sufficient to create jobs and satisfy the public. Foreign direct investment enhances productivity, demand, income level, savings and overall growth. The recent census conducted by the RBI says that the USA is the first source of FDI to India. From 2022 to 23, the FDI inflows shot up due to the contribution of the following countries: Singapore, Mauritius, the Netherlands, the USA and Japan. The FDI creates changes in the employment channel of the home country. The BPO sector is raising foreign investments in India. The Nasscom McKinsey 2020 study says that the BPO sector has contributed to 35 per cent of growth in the past three years. The market for the BPO and ITES industry is US$630 billion. The sectors booming in 2023 because of FDI in India are as follows: testing and analysis, outsourcing, finance, insurance, banking, R&D, computer software and hardware, courier, technology, telecommunications, trading, and automobile industry.
The value of a US$100 billion investment in the AI market implies the demand for technical professionals. FDI enhance the technology-driven sectors. Women and the young generation show interest in technical knowledge. Entrepreneurship, market linkage and promotion activities help women entrepreneurs to establish tech-driven start-ups. The Indian Graduate Skill Index 2023 says that around 48 per cent of Indian graduates are placed in the roles of AI and ML. There is a notable increase in the fields of data analysis, data science, backend development and automation. Indians contribute around 39 per cent in these above-mentioned job roles. The “make in India” plays a crucial role in the development of the manufacturing sector. The eSkill India portal engages students from different streams for e-courses. The Indian government is targeting the improvement of future skills of students. The future technologies are robotics, IoT, 5G technologies, AI and ML. FDI enhance the manufacturing and IT sector.
Employment in the service sector demands cognitive skills. FDI creates more job opportunities in the service sector. FDI led to a growth in the job roles of financial analyst, human resource management and business analyst. The financial analyst role provides 45 per cent of employment. Human resource management and business analysis create job roles for 44 and 45 per cent of the Indian population. The skills of creative thinking, socialisation and problem-solving skills promote the Indian talents.
After the pandemic, there is an upsurge in demand in the healthcare industry. India had received an FDI of US$217 billion. There are proposals to create around 12 million new healthcare jobs by 2030. One of the predictions from the media says that the healthcare industry surpasses other industries such as financial services, Fintech, banking and insurance.
Development of backward areas:
In India, there are around 374 districts declared as educationally backwards. Uttar Pradesh state has the highest number of districts with educationally backward people. The count in Uttar Pradesh is 41. The next state is Madhya Pradesh with a record of 39 districts as backward areas. The next one is Rajasthan with 30 districts. The next one is Tamil Nadu with 27 districts. The last one is Bihar with 25 districts in the remote position. McDonald’s is an American fast food company. The investment of McDonald’s in India for meat supply in backward areas promotes the backward areas. Such integration is called backward vertical integration. Hyundai is a foreign company with an operational unit in Sriperumbudur Tamil Nadu. The operation of foreign companies in the backward area promotes employment opportunities and enhances the infrastructural development of the area.
Stability with exchange rates:
The flow of foreign money helps the central bank to maintain reserves. The reserve of foreign money leads to stability in the foreign exchange rates.
FDI offers tax incentives to certain types of special industries. By the way, the investment promotes the export market. The Indian government is offering incentives for electronic manufacturing, production-based incentives, incentives for special economic zones, and incentives for start-ups.
FDI 2023 policy:
The Indian government encourage foreign investors with programs like the start-up India program, single-window clearance program and goods and services tax implementation. The ease of doing business in India promotes foreign investment. The automatic and government route of FDI helps foreign investors choose the pathway that suits their business goals. The government route of FDI helps the government to monitor the sensitive areas of the economy. The economic stability, sectoral policies, political climate, infrastructural development, and regulatory environment are the factors that contribute to the inflows of FDI.
Chartered accountants work as FDI consultants. To start a company in India, it is essential to understand the tax process, compliances, ease of doing business and profit. The services offered by chartered accountants to foreign investors are consultation regarding FDI in India, documentation process, getting approval from RBI, compliance requirements in the process of company formation, share allotment process, and share transfer, advice in matters related to taxation, capital and repatriation of profits, and documentation in ECB. The companies with international networks conduct the auditing through joint audits. The FDI policy in India is liberal. The investor can operate in India without specific approval from the government or RBI.