The Impact of recent political changes in India on Direct Foreign Investments (DFI) Levels.
Introduction:
Foreign direct investment (FDI) is process of controlling ownership of business enterprises inside one country against an entity based business enterprise in another country for trading aspect.
Foreign direct investments mainly include, building new facilities in other country, to expand their business by investing their new earned profits and try to acquire new mergers and acquisitions. Foreign Direct Investments work towards, building new facilities in other country for expansion of one’s established business in their respective country. Also, it is one of the best examples for International affairs and its associated factors. In the
…show more content…
Many countries have offered incentives to encourage Foreign Direct Investments to their economy, which has positive impacts on Gross domestic product growth. This also help in many ways, Access to markets help to get entry to new countries by starting or acquiring a business in their markets. Access to resources in other way is an effective method to acquire resources such as precious metals and fossil fuels. Foreign direct investments also reduces cost of production which means labor cost will be low and regulations are less restrictive in the foreign market, Which help to increase country capital in a tremendous way and in overall economic …show more content…
According to the United Nations (UN) reports, India has ranked among the top three global investment destinations and also by other international sources. For Indian economy, which has tremendous potential, FDI has a positive impact. It has helped to establish new companies as well as, improved the technology and skills through FDI inflows. This in turn, develops the Indian economy. Considering the various advantages and disadvantages of FDI, the anxiety and the fear of investments has completely gone down as the brighter picture suggests that, it has immense impact to the developmental side in building the economy growth rate. Overall, to see the Indian economy development, the government should follow the right pattern and encourage FDI, as it acts as a major role and the future lies on the benefits of
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
One of the most well accepted models of FDI is Buckley and Casson’s (1976) internalisation theory, who developed a model of MNCs and FDIs centered around the interrelationship between market imperfections, knowledge and the internalisation of production and consumption (Buckley and Casson, 2009). Specifically, the theory recognized that multinational corporations are both horizontally and vertically organized, and that the “the vertically integrated firm internalises a market for an intermediate product, just as the horizontal MNE [multinational enterprise] internalises markets for proprietary assets” (Caves, 1996: p.13). In addition, internalisation will occur, and multinational corporations will expand only as far as the advantages, including barriers to entry, are not offset by the costs of control, communi...
The legal environment of Indian country is favorable for investment. The government has offered many benefits to investors. GDP growth of India is 7.4 percent and it is higher in the world and similar to the growth of China GDP growth (Dhamsana, 2016). The threat from the cheap tires from Chinese companies is also looming large (Singh, 2016).
In order for a country to have a sound GDP and economic growth they must participate in free trade such as outward-oriented policies unlike inward-oriented policies that can hinder a countries success.
According to China history, foreign direct investments were appears and started in China when their governments diminished the isolation policy which has been adopted by China after 30 years. Following the defeat in the Chia-Wu war with Japan, China start to open their coastal city to foreign direct investor after signed the ‘treaty of Shimonoseki’ (Dunning & Narula, 1996, p.418). Their domestic markets were dramatically improved when China start to decentralize the corporate decision making and development of market mechanism. When China changes their economic system to open-door policy in 1978, foreign direct investment (FDI) in China was grown significantly in the Chinese economic system. China become a largest FDI recipient in developing world and globally and surpassed US with the FDI inflows of $36 billion, at the end of 2005, cumulative FDI was $622 billion (Kevin, 2006, p.2). In order to gain more knowledge and improvement of ideologies, China chooses FDI as the best way to growth of their economy rapidly. The most important benefits of FDI were their economy and industry improved because through FDI, China gain the foreign capital, use an advanced technology and skilful labour. This is because skilful labours are needed and important in the industry to produce worth and high quality output. As a result, FDI inflows includes 7% of gross capital formation, 21% foreign-invested enterprises (FIEs), 28% of industrial output produced by FIEs; and 57% China exports were also come from FIEs ( Kevin, 2006, p.2).
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
Should a multinational company reduce its ethical standards to compete internationally? With technology revolutionizing the way businesses compete and obtain resources, the globe is appearing smaller every day. This allows businesses to outsource activities to other countries and save money on production costs and to expand their global reach by opening facilities anywhere in the world. Expanding internationally can be seen as a benefit for many companies however, if the business does not have a strong code of ethics, could cost the company a lot more than the benefits received. Governments of underdeveloped nations may not carry the same legal restrictions than the company’s home country. This could be seen as a temptation to cut costs by
As time progresses, more and more corporations are expanding their firms, creating subsidiaries all over the globe. Thereby creating Multinational Corporations (MNC), whose success primarily falls under an MNC manager. Unlike managers in corporations who do not have a global presence, MNC manager must possess an array of skill and techniques to ensure the success of their international subsidiaries. While a number of management approaches would benefit MNC’s, the contingency approach to management would give managers the tools necessary to excel. The contingency approach is defined as “a research effort to determine which managerial practices and techniques are appropriate in specific situations” (CSU-Global, 2015). Since, MNC management varies greatly from managers from a non-global company the contingency approach would aid them in adjusting to a number
Secondly this article discusses in regards to the opening of foreign investments in India and the on how companies compete in the Indian market place with the help of Coke & Pepsi case study and the Fair and Lovely case study.
This is a documents required in case of import of goods. It is like shipping bill in case of exports. A bill of Entry is the document testifying the fact that goods of the stated value and description in specified quantity are entering into the country from abroad. The customs office supplies this foam which is prepared in triplicate. Three different colors are used to prepare bill of entry. One copy is retains by custom department, other is retained by port trust and the third is kept by the importer.
The entity must respect fair business practices in areas where they operate and endeavor to deal fairly with the entity’s customers, suppliers and competitors. The entite should not take unfair advantage of anyone through manipulation, concealment, abuse of confidential information or unfair ethical practices breaking the code of conducts
If yes, to what extent? Is there any significant relationship between FDI, domestic investment and the economic growth and development of the economy? If so, what is the nature of the relationship? This study therefore aims at providing answers to the above questions. b. MODEL SPECIFICATION
However, on the other hand, as much as the world trade organization has been committed and determined to form the CNS of trade and commerce for its member countries through policies, it has been exceedingly hard as national interests and policies override the organizations’. This has subsequently hampered the organization’s pursuit to equal development between member states. The concept of FDI has not been fully harnessed due to the complexity found within the concept. It has been felt that host countries have been the key beneficiaries of FDI at the expense of the investor’s country. Profits are ploughed back within the host country’s economy as investors pay licensing fees and other charges to the authorities of the host country with little to plough back to their mother countries. This has hugely compromised the concept of FDI (Helpman, 54).
... A lot of companies have directly invested in developing countries like Brazil and India by starting production units, but what we also need to see is the amount of Foreign Direct Investment (FDI) that flows into the developing countries. Companies which perform well attract a lot of foreign investment and thus push up the reserve of foreign exchange. CONCLUSION Globalization In conclusion, international business is best described as globalization.