Benefits Of FDI
FDI is the abbreviated form of Foreign direct investment and refers to the long term involvement of one country with another country. This usually involves participation in joint-venture, management, transfer of expertise and technology etc. Foreign Direct Investment is a part of most economies of the world today and plays a key role in the development of a country’s economy. FDI is now a fundamental part of the global financial system. There are various national policies and plans designed for the having an effective government control on FDI. There are many benefits of FDI both for the investors and the country where investment is being done. Some of these advantages include:
1. Helps in economic growth.
The inflow of foreign direct investment helps in the economic growth of a country.
2. Aids to improve trade.
Foreign Direct Investments opens up a wide spectrum of opportunities in the trading of goods and services. This is true both for export and import production. The increased amount of FDI inflow leads to the manufacture of superior quality products that can be sold at higher prices and are suitable for being exported to other countries.
3. Brings employment opportunities.
FDI inflow results in an increase in the number of employment opportunities for people living in that country. New industrial units are set up affording employment to people from the top level to the working groups like factory workers.
4. Aids in transfer of technology and knowledge.
The inflow of FDI aids in the transfer of technology and knowledge from one country to another. For instance, the people of Asian countries like India had vast knowledge related to IT sector which was later used by many other non Asian countries of the world. Thus, FDI helps in the transfer of knowledge across the world.
5. Benefits to the government.
Foreign direct investment helps in increasing the sources of government income. With the increased flow of FDI the income generated through taxation increases thus, bringing higher revenues to the government.
6. Improves productivity.
FDI plays an important role in enhancing the overall productivity in the host countries.
7. Benefits for the investors.
FDI is also quite beneficial for countries that make investments in other countries. Their companies get opportunities for exploring new global markets, thereby generating higher incomes and profits.
8. Benefits to businesses.
Business entities get easy loans at low rates of interest. These facilities are extremely beneficial for small and medium-sized businesses that otherwise face many problems in getting loans.
Although the local conditions of a country, such as the development of financial markets and the educational level of people living there can an affect the overall impact of FDI on financial and economic growth., on the whole, the FDI has a positive impact for both the investors and places where investment is being done. FDI should be promoted in all parts of the world.