Fdi - an Analylsis

FDI   - An Analysis

Most of the underdeveloped countries suffer from low level of income and low level of capital accumulation. So, these countries require foreign capital to achieve rapid industrialisation and economic development. Most of the developed countries of the world make use of foreign capitals i.e., United States of America borrowed heavily in the 19th century and is in turn called upon to become the major lender of 20th century. Ever England borrowed from Holland in the 17th and 18th centuries and in turn came to lend to almost every other country in the world in the 19th and 20th centuries. It is true that every country in its early phase of development needs foreign capital resources. Thus, foreign capital resources are to be utilized by the developing countries like India, to get the capital equipments, raw materials or any other goods and services, technical know-how, spare parts which cannot be domestically fabricated but at the same time that are essential from the point of view of promoting the objectives of the development strategy adopted. However, the degree of independence on foreign capital varies with the availability of domestic resources, the state of the domestic economy in respect of technical progress, the attitude of the respective Government and the like.

For a developing nation like India, the inflow of FDI is very much essential. The present political scenario too influences the foreign investment movement in to our country. India is moving towards an economic revolution. FDI is an integral element of the resources required for the economic growth of our country. Several initiatives and path breaking proposals have been brought by the Government to gear up the economic growth.

Forms of Foreign Capital

There are two types of foreign capital – Official Capital Flows and Private Capital Flows.

1) Official Capital Flows
a) External Assistance (Foreign Aid)
It refers to the transfer of resources at concessional terms...