Foreign Direct Investment


The Full form of FDI is Foreign Direct Investment. It is the investment made by a company based in one country in the form of a controlling ownership in a business into a company based in another country. It differs from a foreign portfolio investment wherein a foreign company invests in the equities listed on the stock exchange of a country. It is called as direct investment because the investor is influencing or seeking control over an entity or company of a country.

The FDI (Foreign Direct Investment) is usually made into the countries which have high growth prospects, open economies, and skilled workforce available at comparatively cheap rates. Some of the major benefits of FDI are: it brings fresh capital and generates employment in the country, it brings new technologies and skills into a country, it helps in improving the forex position of a country, it taxes revenues and promotes exports into a country, and many more.

The investor company in FDI will be able to reduce the cost of production if labor is cheap in the target foreign market and can also utilizes the natural resources of a country like fossil fuel, metals etc. There are two commonly discussed types of FDIs, which are: Greenfield FDI and Brownfield FDI.


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