Impact of FDI on economic development of India

Abstract

FDI is better than Foreign Institutional Investment (FII) or hot money which is volatile in nature and moves to the stock and bond markets. Because of FDI, there is solid growth in the companies and hence stock market rallies and attracts more capital which raises more funds for the businesses. In FDI there is technology transfer or the movement of technical knowhow to the domestic country due to which skill development takes place and together with higher capital this raises productivity and profitability. FDI in multi-brand retail has been allowed up to 51 per cent. The minimum requirement for the FDI is US$ 100 million, of which at least 50 per cent must be invested in 'backend infrastructure' within three years following the initiation of the FDI. FDI limit in single-brand retail has been increased to 100 per cent; 49 per cent will be under the automatic route and the rest through the FIPB route.