ASSIGNMENT

BENGALURU CENTRAL UNIVERSITY

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted to

DR. WASEEHA FIRDOSE

ASSOCIATE PROFESSOR

Submitted by

BHARATH MAHESHAPPA GADDIKERI

(MB183210)

GOVERNMENT RAMNARAYAN CHELLARAM COLLEGE OF

COMMERCE AND MANAGEMENT

Basaveshwara Circle, Palace Road

BENGALURU – 560001

2018-2020
 FOREIGN DIRECT INVESTMENT:
A foreign direct investment (FDI) is an investment made by a firm or individual
in one country into business interests located in another country. Generally, FDI
takes place when an investor establishes foreign business operations or acquires
foreign business assets in a foreign company. However, FDIs are distinguished
from portfolio investments in which an investor merely purchases equities of
foreign-based companies.
Importance of FDI

➢ Significantly contribute to development and economic growth of host countries.

➢ Promote transfer of technology, innovation, and wealth from developed countries
(home) to developing ones (host).
➢ Allow host countries to invest in activities beyond their domestic saving capabilities
➢ Foreign expertise can be an important factor in improving the existing technical
processes in the country.
➢ Advances in technology and process it improves the competitiveness of countries in
the domestic economy.
➢ Can improve the quality of products and processes in a particular sector, increased
attempts to better human resource.
➢ FDI is the most important source of resource flows to developing countries. In 2004,
it accounted for 51% of these.
➢ For LDCs as a whole it is more important than ODA.
➢ For a number of LDCS ODA is still the main source of foreign finance.
➢ Resource for economic growth Money inflow from overseas Business grows in
several countries
➢ FDI & Economic development Opportunities
➢ Competitive requirement
➢ Cooperative Activities
➢ Branch plant or subsidiary company operations
➢ Rise in National Income
➢ FDI is often seen as a catalyst for a country's development and economic growth.
➢ Foreign direct investment allows company to accomplish several tasks:
• Integration into global economy.
• Technology advancement.
• Increased competition.
• Improved human resources.

Reasons for the importance of FDI Is not only the fact that the foreign Investor finances
the "hardware" such as Investment in new plants and equipment, but FDI can be a major
transfer of technology, knowledge and capital for the host industries. With FDI comes
financial and managerial resources, access to larger markets, technical assistance and
strategic assets, for Instance; Brand name, which can give the host firms, domestic and
International, comparative advantage.

➢ Social development
• to generate and grow the business in developing countries
• the recruitment employees has been an increase jobs
• increase wages
• replace declining market sectors
• Wage differentials between income groups will be exacerbated.

Human Resource Development

This is one of the less obvious advantages of FDI. Hence, it is often understated. Human
Capital refers to the knowledge and competence of the workforce. Skills gained and
enhanced through training and experience boost the education and human capital
quotient of the country. Once developed, human capital is mobile. It can train human
resources in other companies, thereby creating a ripple effect.

Provision of Finance & Technology

Recipient businesses get access to latest financing tools, technologies and operational
practices from across the world. Over time, the introduction of newer, enhanced
technologies and processes results in their diffusion into the local economy, resulting in
enhanced efficiency and effectiveness of the industry.

Increase in Exports
Not all goods produced through FDI are meant for domestic consumption. Many of
these products have global markets. The creation of 100% Export Oriented Units and
Economic Zones has further assisted FDI investors in boosting their exports from other
countries.
Development of Backward Areas
This is one of the most crucial benefits of FDI for a developing country. FDI enables the
transformation of backward areas in a country into industrial centers. This in turn
provides a boost to the social economy of the area. The Hyundai unit at Sriperumbudur,
Tamil Nadu in India exemplifies this process.
Increased Employment and Economic Growth
Creation of jobs is the most obvious advantage of FDI. It is also one of the most
important reasons why a nation, especially a developing one, looks to attract FDI.
Increased FDI boosts the manufacturing as well as the services sector. This in turn
creates jobs and helps reduce unemployment among the educated youth - as well as
skilled and unskilled labor - in the country. Increased employment translates to
increased incomes and equips the population with enhanced buying power. This boosts
the economy of the country.