Benefits of larger FDI

The benefits of larger FDI can be tangibly felt in the domains pertaining to technological advancements, generation of export, production improvements, and hastening of manufacturing employment.

Capital inflow into India has increased and so have the exports from the country. Thanks to the economic boom India is experiencing, some Indian companies are doing better than even the multinational corporations.

The benefits of larger FDI have been briefly elaborated below:

1. Improved human capital: Indian industries are predominantly labor based but there is also a significant number of capital based companies. A capital intensive set up is indeed an expensive proposition but with the existing as well as potential labor intensive industries, India can look forward to more professional and sophisticated number of workers and employees at every level. Human capital, in terms of quantity was never a big problem in India, thanks to its huge population and quality and efficiency in work has been ushered in by the MNCs.



2. Competition Effect: The benefits of larger FDIs will include the launching and marketing of new products and brands in the Indian market. New products are used by the multinational corporations and then demonstrated in the Indian market. The processes followed by MNCs in India serve to have a demonstration effect on Indian companies which in turn improves market competition and the standard of products. This had started in the 1980s due to Japanese firms and as a result, Indian firms started inculcating the practices of QC, JIT, and QA.



3. Manufacturing Employment: Larger FDIs definitely generate more and more employment opportunities. The opportunities are highly experienced in the manufacturing area. This not only includes the quality human resource but also provides for quick and efficient work and effective outcomes.



4. New Technology: Technological advancements take place as larger FDIs come in. In fact, three-fifths of the FDIs result in new and advanced technologies. The local industry is benefiting from this to a large extent. This as a result, would encourage more and more foreign firms for investment.

The benefits of larger FDI are, however, very few in number but as India capitalizes on the above mentioned benefits, there will be more competition in the market at large and the rural sector of the country will be in the process of reformation, thus bringing about a socio-economic stability.