Foreign Direct Investment

Topics: Foreign direct investment, Investment, Macroeconomics Pages: 26 (7646 words) Published: December 30, 2012

“Analytical Study of Foreign Direct Investment in India”

Project submitted to the Department of Commerce
Shri Ram College of Commerce, University of Delhi,
in fulfillment of the requirement of
B.Com (H) - 3rd Years

Submitted to :Submitted by :


I hereby declare that the project report named “Analytical Study of Foreign Direct Investment in India” is based on my understanding of the subject and has not been copied from some published source or website. My indebtedness to other works on the subject has been duly acknowledged at the relevant places.


The present work is an effort to throw some light on “Foreign Direct Investment” in India. The work would not have been possible to come to the present shape without the able guidance, supervision and help to me by number of people.

With deep sense of gratitude I acknowledge the encouragement and guidance received from my mentor Mr. VK Singhania who helped and supported me during the course of completion of my project. His supervision, logical insight and patient encouragement enabled me to complete the present work. The association has been a very great opportunity.


Introduction 4
Meaning 5
Definition 9
Types of FDI12
Methods of FDI13
Importance of FDI14
FDI in India18
Analysis of FDI30

Foreign Direct Investment
These three letters stand for foreign direct investment. The simplest explanation of FDI would be a direct investment by a corporation in a commercial venture in another country. A key to separating this action from involvement in other ventures in a foreign country is that the business enterprise operates completely outside the economy of the corporation’s home country. The investing corporation must control 10 percent or more of the voting power of the new venture. According to history the United States was the leader in the FDI activity dating back as far as the end of World War II. Businesses from other nations have taken up the flag of FDI, including many who were not in a financial position to do so just a few years ago. The practice has grown significantly in the last couple of decades, to the point that FDI has generated quite a bit of opposition from groups such as labor unions. These organizations have expressed concern that investing at such a level in another country eliminates jobs. Legislation was introduced in the early 1970s that would have put an end to the tax incentives of FDI. But members of the Nixon administration, Congress and business interests rallied to make sure that this attack on their expansion plans was not successful. One key to understanding FDI is to get a mental picture of the global scale of corporations able to make such investment. A carefully planned FDI can provide a huge new market for the company, perhaps introducing products and services to an area where they have never been available. Not only that, but such an investment may also be more profitable if construction costs and labor costs are less in the host country. The definition of FDI originally meant that the investing corporation gained a significant number of shares (10 percent or more) of the new venture. In recent years, however, companies have been able to make a foreign direct investment that is actually long-term management control as opposed to direct investment in buildings and equipment. FDI growth has been a key factor in the “international” nature of business that many are familiar with in the 21st century. This growth has been facilitated by changes in regulations both in the originating country and in the country where the new installation is to be...
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