I have been reading quite a about stocks, FDI etc in the last month.
Here is a small intro on Foreign Direct Investment(FDI).
The world has come of age after globalization. People with money are exploring new coutries with large market and exploitable workforce.
In todays world, FDI is very essential for the growth of the economy. Coutries like India, China etc are competing with each other for FDIs. Infact many policies are framed by developing coutries to attract more FDI
Definition
To put it crudely, FDI is the investment made in businesses outside the investors economy. A parent foreign enterprise teams up with a foreign affliate, which together form a multinational cooperation. FDI is permitted through joint ventures, technical collaborations etc. For example, Bharthi (ya, the airtel company) and Wal mart have teamup to form Bharti Walmart Pvt. Ltd. and have already opened up stores across india.
The advantage with FDI is that it is non-debt creating and non-volatile. The returns depend on the performance of the projects.
FDI is not allowed in all sectors. Generally most countries wouldn't prefer to have FDI for Arms, Nuclear energy and other sensitive sectors.
