Foreign direct investment (FDI) is an investment in a business by an investor from another country for which the foreign

investor has control over the company purchased. The Organization of Economic Cooperation and Development
(OECD) defines control as owning 10% or more of the business. Businesses that make foreign direct investments are often
called multinational corporations (MNCs) or multinational enterprises (MNEs). An MNE may make a direct investment by
creating a new foreign enterprise, which is called a greenfield investment, or by the acquisition of a foreign firm, either called
an acquisition or brownfield investment.
 Domestic capital is inadequate for purpose of economic growth
 Foreign capital is usually essential, atleast as a temporary measure, during the period when the capital market is in the
process of development
 Foreign capital usually brings it with other scarce productive factors like technical know how ,business expertise and
knowledge
 India has already marked its presence as one of the fastest growing
economies of the world .it has been ranked among the top 3 attractive
destination for inbound investments.
 Since 1991,the regulatory environment in term of foreign investment
has been consistently eased to make it investor-friendly.
Foreign direct investment(FDI)into equity jumped 48% after the launch of the “make in India programme.
 India is likely to be the fastest growing economy in 2018 with growth expected to accelerate to 7.3% year as per the World
Bank’s Global Economic Prospects Report, 2018.In the words of India’s popular Prime Minister, the economic reforms

should be founded on the principles of ‘minimum government, maximum governance’ and ‘red carpet instead of red tape’.
 Resource challenge
 Equity challenge
 Political challenge
 Federal challenge
 Lack of clear cut and transparent policies for FDI
 High tariff rates & corporate tax rate by international standards.
On August 28th, 2017, the Department of
Industrial Policy and Promotion (DIPP) had issued the updated and revised Foreign Direct Investment Policy, 2017 – 2018
(FDI Policy 2017). The FDI Policy 2017 incorporated various notifications issued by the Government of India over the past
year.
 Abolition of the Foreign Investment Promotion Board (FIPB)
 Introduction of ‘Competent Authorities’
 Introduction of ‘Standard Operating Procedure’ (SOP) to process FDI proposals.
 Foreign experiments can be an important factor in improving the existing technical processes in the country
 Advances in technology and process it improves the competiveness of countries in domestic economy
 Can improve the quality of products and processes in a particular sector
 Local firms may loose business because of the attained power of foreign firm.
 The repatriation of profit may drain out the capital of the host country.
 Technological dependence on foreign technology sources.
 FDI should be aggressively promoted in R&D, manufacturing
 Import duty should be imposed to protect domestic production units
 Flexible labour laws is needed
 Education sector should be opened to FDI
 Cooperative societies should be formed for farmers and other agricultural suppliers to take care of their rights.
Foreign investor have an important role in economic development. This is because foreign investor have opened a new
dimension by creating new industries in developing countries.