Foreign Direct Investment in Indian Economy

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Foreign Investment in India or more precisely Foreign Direct Investment (FDI) in India is one of the most talked about issues in the entire world economy in recent times. Rated among the top emerging nations, India's liberalization policies are paying rich dividends to the economy as a whole.

Foreign Direct Investment (FDI) is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor." The FDI relationship, consists of a parent enterprise and a foreign affiliate which together form a Trans-National Corporation (TNC).

India, post liberalization, has not only opened it's doors to foreign investors but also made investing easier for them by implementing the following measures:
  • Foreign exchange controls have been eased on the account of trade.
  • Companies can raise funds from overseas securities markets and now have considerable freedom to invest abroad for expanding global operations.
  • Foreign investors can remit earnings from Indian operations.
  • Foreign trade is largely free from regulations, and tariff levels have come down sharply in the last two years.
  • While most Foreign Investments in India (up to 51 %) are allowed in most industries, foreign equity up to 100 % is encouraged in export-oriented units, depending on the merit of the proposal. In certain specified industries reserved for the small scale sector, foreign equity up to 24 % is being permitted now.
As the industry progresses, opportunities abound in India, which has the world's largest middle class population of over 300 million, is attracting foreign investors by assuring them good returns. The scope for foreign investment in India is unlimited. India offers to foreign investors a well balanced package of fiscal incentives for exports and industrial investments that includes:
  • Complete tax exemptions.
  • Investment incentives are offered by both the Central Government and the Government of the State in which the unit is located.
  • India has tax treaties with 40 countries.

Moreover, the support of the common man regarding FDI< is clearly from the sharp hike in India's gross expenditure in the past few years.

Thus the Indian economy is proving itself highly conducive to Foreign Investment.

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