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FDI is important topic in today’s globalized economy, which contributes greatly in improving the economy of any country. You must have often heard the mention of FDI in news or financial reports. But do you know what is the FDI full form? What is the meaning of FDI? And why is it so important for the development of any country?

If you also want to get complete information about Foreign Direct Investment (FDI), then this article will be very helpful for you. Let us, without any delay, known in detail about the meaning, types, benefits full form of FDI, and its impact on the Indian economy!

What is FDI full form?

• The full form of FDI is “Foreign Direct Investment”.

Foreign Direct Investment (FDI) is an investment made by a company or person of one country in a company of another country. Direct control or ownership can also be obtained in this.

• Example: If USA’s Tesla company sets up a manufacturing plant in India, then it will be called FDI.

What does FDI mean? Foreign Direct Investment

FDI means investment by any foreign company or individual in another country. The motive of this investment is to earn profit. When a foreign company buys shares of a company of another country or sets up new plants, it is called FDI.

Examples of Foreign Direct Investment

• Google invested in India’s Jio Platforms.
• Amazon expanded e-commerce business in India.
• Hyundai set up its manufacturing factory in India.

Types of FDI with Explanation

FDI is mainly of 3 types, which depend on the method of investment and objectives.

1. 1. Greenfield Investment – When a foreign company invests from zero in a new business, it is called Greenfield FDI.Example

• Apple opened new Apple Stores in India
• Tesla set up new manufacturing plants in India

1. 2. Brownfield Investment – When a foreign company buys a part or the whole of an existing company, it is called Brownfield FDI. Example

• Walmart bought a large part of Flipkart
• Facebook invested in Jio Platforms

1. 3. Mergers & Acquisitions (M&A) – When a foreign company merges with a company from another country or acquires it, it is called M&A FDI. Example

• Tata Motors bought UK’s Jaguar Land Rover Company
• Microsoft acquired Nokia’s mobile business

Benefits of FDI (Foreign Direct Investment)

• Economic Growth – FDI leads to GDP growth and new industries develop. Infrastructure development is helped.

• New Jobs are Created – When foreign companies start new businesses, new job opportunities increase. Skill development takes place, which is good for long-term growth.

• Technology & Innovation – FDI brings new technology and innovations. Example: Tesla brought new EV technology to India.

• Export & Foreign Exchange Increases – FDI creates new manufacturing hubs which increase exports. Forex reserves increase, which is necessary for economic stability.

• Competition & Consumer Benefits – FDI increases competition in new products and services, which is beneficial for consumers. Consumers get cheap and good quality products.

Disadvantages of FDI (Foreign Direct Investment)

• Loss to Local Businesses – Foreign companies increase competition for local businesses, which is a risk for small businesses.

• Profit goes out – Foreign companies which earn profit, send major part of it back to their country, which is a loss for the host country.

• Economic Dependence Increases – Due to too much FDI any country can become dependent on foreign companies.

FDI Policies & Rules in India

India’s FDI policy aims to attract foreign investment for economic growth. It uses two routes: automatic (no approval needed for most sectors) and government (approval required for sensitive sectors). Sector-specific rules vary, with some allowing 100% FDI. Certain sectors are prohibited. The policy, governed by FEMA and RBI regulations, is subject to change. Investors should conduct due diligence.

• FDI inflow in India is increasing every year!
• In 2023, a total of ₹6 lakh crore FDI came to India.
• Top Sectors: IT, E-commerce, Manufacturing, Automobiles.

Top Countries that have FDI in India

• USA – Amazon, Walmart, Google
• Japan – Honda, Toyota
• UK – Vodafone, HSBC
• Germany – BMW, Siemens
• UAE – Etihad Airways, DP World

The most important thing to remember is

• FDI helps a lot in growing the economy of any country.
• FDI is necessary for new jobs, technology, and infrastructure development.
• But it is important to make proper policies and regulations for local businesses.
• How did you like this article? Do let us know by commenting!

In this article, we explored the full form of HIV and its significance in various contexts. Understanding such abbreviations not only enhances our knowledge but also helps in better communication. If you found this information helpful, feel free to explore more full forms on DoubtHub.com and expand your understanding. Stay informed, and keep learning with us!