Advantages of FDI

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Integration into global economy - Developing countries, which invite FDI, can gain access to a wider global and better platform in the world economy.

Economic growth - This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country.

Trade - Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country.

Technology diffusion and knowledge transfer – FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. Developing countries by inviting FDI can introduce world-class technology and technical expertise and processes to their existing working process. Foreign expertise can be an important factor in upgrading the existing technical processes.

For example, the civilian nuclear deal led to transfer of nuclear energy know-how between the USA and India.
Increased competition - FDI increases the level of competition in the host country. Other companies will also have to improve on their processes and services in order to stay in the market. FDI enhanced the quality of products, services and regulates a particular sector. Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

Human Resources Development - Employees of the country which is open to FDI get acquaint with globally valued skills.

Employment - FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India.

Last Updated on 1/5/2012