FDI- Boon Or Bane for Indian Economy
Foreign Direct Investment (FDI) is an investment made by a company or individual of one country
in business interests in another country. It has been a controversial issue in Indian economy and also it was used as a political aspect by two major political parties in India. In India, FDI was introduced in 1990.
FDI is a boon to country's economic growth as it helps in overall GDP flow in the country. There are many advantages and disadvantages too. When it compared with advantages, which are -
FDI helps in revenue generation, employment, improve the technology, change the culture followed in Retail industry, Cultural exchange, Infrastructure Development, Price Reduction and Healthy competition.
Consumers are the main beneficiaries since product will be of higher quality and great efficiency with less cost compared to other sellers. It helps the farmers because they be selling directly to FDI retailers without any merchants and thus helps them to get the good value for their yields. It helps in creating good number of jobs because they run streamlined operations. FDI is likely to increase tax flow and increase tax revenue for the Govt. because they the records of payments. It also recommends other retailers to comply with the tax policy.
Some of the disadvantages are that it replace local companies and harm local entrepreneurship. It will take the best resources and also decrease local R & D undertakings. Foreign investors are volatile since they run after profit. If they see better opportunity elsewhere, they may shift their investments.
This brings uncertainty factor and lead to cancellation of contracts which in turn causes Devaluation
of Rupee and financial crisis at hand.
FDI creates imbalances either in rich states or high skill sectors. This leads to a probable increase
in the gap between rich and the poor. FDI projects are mostly concentrated in states like Delhi, Gujarat and Maharashtra leaving other states like Bihar, Jharkhand etc., which increases regional economic gap further.
Profit - sharing behavior among MNCs induced by huge tax arbitrage between jurisdictions. While the average effective tax rate in China, Brazil and India ranges from around 17% to 32%, it is much lower in Bermuda, Luxembourg and Netherland. Corporate tax evasion is an issue that is even faced in USA and UK and this is something that India should take into consideration.
Other issues concerning FDI disadvantages are :-
1. Money laundering to cover up.
2. Harm domestic companies.
3. Possibility of Inflation.
4. Increase in dependency.
5. Political involvement.
Though FDI is a good option to move forward but it has Merits and Demerits which should be taken into consideration while designing policies n FDI.
Over dependence on Foreign Investments should not be encouraged.
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in business interests in another country. It has been a controversial issue in Indian economy and also it was used as a political aspect by two major political parties in India. In India, FDI was introduced in 1990.
FDI is a boon to country's economic growth as it helps in overall GDP flow in the country. There are many advantages and disadvantages too. When it compared with advantages, which are -
FDI helps in revenue generation, employment, improve the technology, change the culture followed in Retail industry, Cultural exchange, Infrastructure Development, Price Reduction and Healthy competition.
Consumers are the main beneficiaries since product will be of higher quality and great efficiency with less cost compared to other sellers. It helps the farmers because they be selling directly to FDI retailers without any merchants and thus helps them to get the good value for their yields. It helps in creating good number of jobs because they run streamlined operations. FDI is likely to increase tax flow and increase tax revenue for the Govt. because they the records of payments. It also recommends other retailers to comply with the tax policy.
Some of the disadvantages are that it replace local companies and harm local entrepreneurship. It will take the best resources and also decrease local R & D undertakings. Foreign investors are volatile since they run after profit. If they see better opportunity elsewhere, they may shift their investments.
This brings uncertainty factor and lead to cancellation of contracts which in turn causes Devaluation
of Rupee and financial crisis at hand.
FDI creates imbalances either in rich states or high skill sectors. This leads to a probable increase
in the gap between rich and the poor. FDI projects are mostly concentrated in states like Delhi, Gujarat and Maharashtra leaving other states like Bihar, Jharkhand etc., which increases regional economic gap further.
Profit - sharing behavior among MNCs induced by huge tax arbitrage between jurisdictions. While the average effective tax rate in China, Brazil and India ranges from around 17% to 32%, it is much lower in Bermuda, Luxembourg and Netherland. Corporate tax evasion is an issue that is even faced in USA and UK and this is something that India should take into consideration.
Other issues concerning FDI disadvantages are :-
1. Money laundering to cover up.
2. Harm domestic companies.
3. Possibility of Inflation.
4. Increase in dependency.
5. Political involvement.
Though FDI is a good option to move forward but it has Merits and Demerits which should be taken into consideration while designing policies n FDI.
Over dependence on Foreign Investments should not be encouraged.
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