Article Details

A Detailed Study on the Foreign Direct Investment In India Since 1991 |

Dr. Rajani Sharma, in Journal of Advances and Scholarly Researches in Allied Education | Multidisciplinary Academic Research


FDI has become a keycomponent of national development strategies for all most all the countriesover the Globe. FDI is considered to be an essential tool for jump-startingeconomic growth through its bolstering of domestic capital, productivity andemployment. FDI are investments made by residents of one economy withthe objective of establishing a lasting interest in a company located inanother economy (host economy). With `lasting interest’ we mean both theexistence of a long-term relationship and a degree of ownership of the foreignfirm. In statistics, ownership of at least 10 percent of the ordinary shares inUS, India etc. and 25 per cent in Britain has been the criterion for theexistence of a direct investment relationship. Ownership of less than 10percent is considered as a portfolio investment. The presence of foreigninvestors means that firms controlled by foreigners produce part of domesticoutput. Foreign direct investment has grown at rates far beyond those ofinternational trade since the late 1980s. Especially in the second half of the1990s, firms were exceptionally active in cross border Mergers and Acquisitions(M&A). The outstanding global stock of FDI more than doubled in ten yearstime from 8.3 percent of world output in 1990 to 17.5 percent in 2000. It isconceivable that the larger presence of FDI is partly responsible for theobserved increase in cross-country business. FDI refers to the purchase by the citizens of one countryof non-financial assets in another country. Foreign direct investment involvesthe acquisition or establishment of a firm, company or enterprise in a countryoutside of the registered corporate home country. FDI in real estate involvesacquisition of land or building across all commercial, residential and retailsegments. Any construction activity is also included in FDI.