FDI- “BONE OR BANE”
Author: Avneet Singh, May 3, 2015 – Posted in: Foreign Trade – Tags: , ,

FDI- BONE OR BANE

I am not taking an issue which is precise or new these days. This issue is raised many times in parliament and will be raise many times in future. FDI means FOREIGN DIRECT INVESTMENT, by hearing this word FDI people considered about a most hike and protested policy of UPA government “FDI in Multi-brand retail”. But FDI is not just FDI in multi brand retail but it is in many fields. In INDIA FDI is being introduced firstly in 1991 after a huge economic crises by Finance Minister of that time DR. Manmohan Singh, in his most famous policy LPG policy under Globalization.

In INDIA, FDI is in many Fields From POWER to COMMUNICATION to AUTOMOBILES to DEFENSE & many mores. Even the policy of government named “MAKE IN INDIA” will also lead to 2 FDIs One is Foreign Direct Investment and another is First Develop India. But we are talking about FDI which is Foreign Direct Investment.

Before coming to topic of is it BONE or BANE and not being PRO-FDI or PRO-NO FDI, What will be your answers over following QUESTIONS…
1, What will you prefer Micromax over Apple?
2, What will you prefer Lakhani over Adidas?
3, What will you prefer Idea over Vodaphone?
4, What will you prefer Tata over Volkswagon?
I know preference differ person by person according to his/her constraint but if we assume our constraint to be not-limited or if we assume we can afford any of these goods many of people will go for Apple over Micromax, Adidas over Lakhani, Vodaphone over Idea and Volkswagon over Tata.

Now, coming to topic of bane or boon it will depend on its advantages or disadvantages but FDI doesn’t make us Slaves again as per the orthodox thinking of Indians or we can say fear of Indian to be anslaved again.

Advantages
Foreign direct investment has many advantages for both the investor and the recipient. One of the primary benefits is that it allows money to freely go to whatever business has the best prospects for growth anywhere in the world.
This gives well-run businesses regardless of race, color or creed a competitive advantage. It reduces the effects of politics, cronyism and bribery.
Individual investors receive additional benefits. Their risk is reduced because they can diversify their holdings outside of a specific country, industry or political system.
Recipient businesses benefit by receiving management, accounting or legal guidance in keeping with the best practices used by their lenders. They can also incorporate the latest technology, innovations in operational practices, and new financing tools that they might not otherwise be aware of.
The standard of living in the recipient country is also improved by higher tax revenue from the company that received the foreign direct investment.
Another advantage of FDI is that it can offset the volatility created by “hot money.” Short-term lenders and currency traders can create an asset bubble in a country by investing lots of money in a short period of time

Disadvantages
Too much foreign ownership of companies can be a concern, especially in industries that are strategically important.
Second, sophisticated foreign investors can use their skills to strip the company of its value without adding any. They can sell off unprofitable portions of the company to local, less sophisticated investors. Or, they can borrow against the company’s collateral locally, and lend the funds back to the parent company.

By advantage that doesn’t mean it is for all sectors or for all countries, it can’t be possible inn one country an can be successful in another, it can be failure in a sector and can be a massive success in another. So, Bone or Bane depends on the Political, Economic and Social measures Of economy Not on The sector Investment is being making.

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