INDIA the Foreign Direct Investment Magnet

Today, India is one of the premiere destinations for investment. India toppled US and China in 2015 to become the top investment grosser in the world and since then has been a ‘sweet spot’ for the foreign investors. While presenting Budget 2020, Finance Minister Nirmala Sitharaman said India has received massive foreign direct investment worth $284 billion during 2014-19 from $190 billion that came in during the years 2009-14.

- Jyotsna Joshi

After the present government came into power there have been major initiatives, policy changes and a slew of reforms that has placed India on the global industrial map as one of the fastest growing economies and one of the most attractive investment destinations in the world.

The report titled “the Bird of Gold”, of McKinsey has spoken on India’s upcoming decade’s journey and says, “If India continues its recent growth trend, average household incomes will triple over the next two decades and it will become the world’s fifth largest consumer economy by the year 2025”.

What is FDI?

Foreign Direct Investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country such as ownership or controlling interest in a foreign company. Another way to understand is the flow of capital between countries is known as FDI. According to the United Nations Conference for Trade and Development (*UNCTAD*), FDI is “investment made to acquire lasting interest in enterprises operating outside of the economy of the investor/”.FDI is a key element in international economic integration because it creates stable and long-lasting links between economies.

How FDI is different from FPIs?

FDI is distinguished from ‘*portfolio*’ investment in that, as well as being ‘lasting’, it means that the investor has control over the assets invested in. A single flow of capital between two countries is described as outward for the investing country and inward for the recipient country. FDI is undertaken by both private sector firms and governments. FDI is beneficial as it enters a market to stay for a long term.

How FDI boost economic growth