Green Field

Only available on StudyMode
  • Download(s) : 21
  • Published : February 24, 2013
Open Document
Text Preview
GREENFIELD INVESTMENT (FDI) FOR SUSTAINABLE DEVELOPMENT OF INDIA: INCREASING BENEFITS & REDUCING COSTS Mr. Chandan Parsad (Assistant Professor)
Management Department, Tecnia Institute of Advanced Studies, Institutional Area, Madhuban Chowk, Rohini, Delhi-110085, India E-mail: chandanparsad@gmail.com
Contact No. – 9868907936
ABSTRACT
FDI to developing countries in the 1990s was the leading source of external financing and has become a key component of national development strategies for almost all the countries in the world as a vehicle for technology flows and an important source of non-debt inflows for attaining competitive efficiency by creating a meaningful network of global interconnections. This paper evaluates that what are the various factors contribute to Greenfield FDI which provide opportunities to host countries to enhance their economic development and opens new opportunities to home countries to optimize their earnings by employing their ideal resources. Greenfield Investment is the most typical modes in internal and external growth process of a business organization, and is thus most commonly used when investment decisions are being made. The present paper also attempts to analyze significance of the Greenfield FDI Inflows for sustainable development in India. The research consists of study of Greenfield FDI for sustainable development in INDIA, analysis of factors affecting Greenfield Investment responsible for increasing benefits and reducing costs. Thus, the mobility of international capital flows has gained importance not only from a development point of view but also from a point of sustainable development, especially with respect to maximizing revenues and minimizing costs. Key Words: Greenfield Investment, Foreign Direct Investment, Employment, Technology transfer and Sustainable Development

1. INTRODUCTION
Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares. FDI is one example of international factor movement. Foreign direct investment (FDI) is an integral part of an open and effective international economic system and a major catalyst to development. Yet, the benefits of FDI do not accrue automatically and evenly across countries, sectors and local communities. National policies and the international investment architecture matter for attracting FDI to a larger number of developing countries and for reaping the full benefits of FDI for development. The challenges primarily address host countries, which need to establish a transparent, broad and effective enabling policy environment for investment and to build the human and institutional capacities to implement them. Broadly, FDI are of two types: Horizontal and Vertical FDI. Horizontal FDI occurs when the MNE (Multi-National Enterprise) enters a foreign country to produce the same product(s) produced at home (or offer the same service that it sells at home). It represents, therefore, a geographical diversification of the MNE’s domestic product line. Most Japanese MNEs, for instance, begin their international expansion with horizontal investment because they believe that this approach enables them to share experience, resources, and knowledge already developed at home, thus reducing risk. If FDI...
tracking img