Meaning.

Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form an International business or a Multinational corporation( MNC)

TYPES OF FDI
An individual; A group of related individuals; An incorporated or Unincorporated; A group of related enterprises;

A Public Company or Private company;

A government body;

An estate (law), trust or other societal organisation; or Any combination of the above.

Methods of Foreign Direct Investments.

The foreign direct investor may acquire 10% or

more of the voting power of an enterprise in an economy through any of the following methods: By incorporating a wholly owned Subsidiary or Company By acquiring shares in an associated enterprise Through a Merger or an Acquisition of an unrelated enterprise Participating in an equity Joint venture with another investor or enterprise

FDI IN INDIA
FDI has helped the Indian economy grow, and the government continues to encourage more investments of this sort but with $5.3 billion in FDI in 2004 India gets less than 10% of the FDI of

China. Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that may have needed economic attention, and address the various problems that
continue to challenge the country.

 FDI investments are permitted through financial

collaborations, through private equity or preferential allotments, by way of capital markets through Euro issues, and in joint ventures. FDI is not permitted in the arms, nuclear, railway, coal & mining industries.

The Indian national government also provided

permission to FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately $352.5m.

Advantages of FDI in India:

The Indian government made several reforms in the

economic policy of the country in the early 1990s. This helped in the liberalization and deregulation of the Indian economy and also opened the country's markets to foreign direct investment. As a result of this, huge amounts of foreign direct investment came into India through Non- resident Indians, international companies, and various other foreign investors. The growth of FDI in India boosted the economic growth of the country.

Major Advantages of FDI in India have been in terms of : Increased capital flow. Improved technology. Management expertise. Access to international markets. Economic growth. Employment and skill levels. Technology diffusion and knowledge transfer. Trade.

Disadvantage of FDI in India.

FDI has and adverse effects on competition.
FDI will be make the host country lost the control

over domestic policy. Foreign direct investment may entail high travel and communications expenses. Inflation is increased. Local market is affected badly .

Amount of foreign direct investment in India

The total amount of FDI in India came to around

US$ 42.3 billion in 2001, in 2002 this figure stood at US$ 54.1 billion, in 2003 this figure came to US$ 75.4 billion, and in 2004 this figure increased to US$ 113 billion. This shows that the flow of foreign direct investment in India has grown at a very fast pace over the last few years. The various forms of foreign capital flowing into India are NRI deposits, investments in the commercial banks of India, and investments in the country's debt and stock markets.

FDI in major sectors in India

The major sectors of the Indian economy that have benefited from FDI in India are Financial sector (banking and non-banking). Insurance. Telecommunication. Hospitality and tourism. Pharmaceuticals. Software and Information Technology.

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