7 Major Benefits of Foreign Direct Investment

Table of contents Proper stimulation of economic development: Creating competitive market Increase in the export region Provision of technology and finance Development of some of the backward areas Proficient development in the human resource scale Increase in employment followed by economic growth: The field of FDI or foreign direct investment is mainly stated as an […]

Foreign Direct Investment

The field of FDI or foreign direct investment is mainly stated as an investment of funds from any organization. This investment takes place from one place to another with the aim of creating lasting interest. There have been multiple surveys to prove that this lasting interest will be determined when firms acquire minimum of around 10% of voting power in another firm.  Such reinvestment of the profits from overseas operations can also be termed under FDI. Now, there are 7 major benefits of FDI that you might have to learn more about first. So, let’s jump right into the advantages.

Proper stimulation of economic development:

This is one major advantage of FDI. It is one prominent source of higher revenues and external capital for country. While constructing factories, some materials, labor and equipment will be utilized. When the construction is covered, the factory will then employ some local employees and use local services and materials. So, the people, as employed by such factories, get the chance to have some money to invest. It helps in creating more jobs. It will create added tax revenues for government.

Creating competitive market

By just facilitating the entry of the foreign organizations right into the domestic marketplace, foreign investment in India will help in creating a competitive environment and also break some domestic monopolies. A healthy and a competitive  form of environment will push firms to enhance the processes continuously and also product offers to foster innovation. Consumers can help gain access to the wider ranges of competitive based priced products now.

Increase in the export region

Always remember that not all goods as produced through FDI can be used for domestic based consumption. Most of these items will have their share of global markets. Creation of around cent percent export oriented units and even economic zones will have some assisted FDI investors in just boosting exports from some of the other countries. On the other hand, the constant FDI flow into country translates into continuous flow of the current foreign exchange. It will help the central bank of the country to maintain comfortable reserve of the foreign exchange. It helps in ensuring stable form of exchange rates.

Provision of technology and finance

If you are looking for foreign investment in an Indian company, then you might have to check out the benefits involved with it. The recipient businesses are known to gain access to some of the latest technologies, financial tools and major operational practices from the global platforms. With time, there will be new introduction of enhanced technologies along with processed results in diffusion into local economic strata. It will result in enhanced effectiveness and efficiency of the said industry.

Development of some of the backward areas

Another crucial beneficial aspect of FDI in India has to be associated with development of backward areas. It is why FDI is widely popular in developing countries like India. FDI helps in the transformation of backward areas in a positive manner with industrial centers. It helps in boosting the social economy of the selected area. For example, you have the Hyundai unit located at Sriperumbudur In Tamil Nadu, India. FDI in India has its share of innumerable benefits, with this one, being  at the top.

Proficient development in the human resource scale

One of the obvious advantages associated with FDI is development of the Human Resource field. But, unfortunately, this stage is quite understated. Human capital mainly defines the knowledge and competency associated with a workforce area. The skills, which are gained and then enhanced through experience and training, can be used in boosting the education and even human capital quotient of the country, which is India. When it gets readily developed, the human capital will turn mobile. It can easily train the HR in companies to create ripple effect.

Increase in employment followed by economic growth:

One major advantage of FDI in India is creating jobs. It is another major reason on why a developing nation like India is looking to attract FDI. Increased FDI helps in boosting manufacturing and also servicing sectors. It helps in creating jobs and reduces the rate of unemployment among educated youth.

So, this is why India is more into FDI these days. Before you end up in this form of investment on your own, always make sure to check out the options well.

Author Bio

Amy Jones is the lead legal expert at, Ahlawat & Associates-the best law firms who advice to domestic or international clients in foreign investment in India. She is a passionate writer and loves to help people in all aspects of legal matters.You can follow her on Twitter, Linkedin.

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