Identifying the Trends and Strategies of Foreign Direct Investment

Foreign Direct Investment

With the globalization of the economy, there has been a creation of massive opportunities and efforts to attract foreign direct investment in India. Several trends determine the drive such as the availability of cheap labor, natural resources, and low cost. However, it is all about making rational decisions. The FDI efforts are not only driven for investment alone but to acquire technology and knowledge to access new markets and to achieve profits.  Apart from this, the investment from the foreign countries also helps in resolving a host of problems such as providing valuable capital to enhance the growth and development of economy and leads to the transfer of knowledge and technology.

Furthermore, it also allows access to foreign markets. However, skills and knowledge of the workforce as well as different aspects of productivity impact the efforts to attract FDI. A majority of the countries across the globe try to encourage foreign investment as the transfer of technology from foreign countries play a significant role in boosting the economy of developing countries such as India. As far as foreign investment in India is concerned, it can benefit from the technology transfer that results from the investment. Furthermore, it also leads to network building and encourages market access eventually resulting in the diffusion of new technologies thereby enabling the country to develop its technological and organizational capacity. An environment that encourages interaction enables the diffusion of technological advancement for the creation of high-tech products and leads to the promotion of cultural exchange between several countries.

Enhancing the opportunities of FDI

Several indicators determine foreign direct investment such as the formation of suitable strategies and adopting the right measures for the improvement of macroeconomic conditions, infrastructure and personnel skills that contribute to the growth of enterprise development. These measures are likely to become more visible with more foreign investments. However, to encourage more foreign investment in the Indian company, it is necessary to make the political environment friendlier and to make the environment more interactive, it is essential to remove the bureaucratic and legislative barriers. Apart from this, the host country can expect more investment when the regulations become transparent on FDI and the efforts of the legislation to protect the rights of the investors are implemented. Foreign investment also helps to eliminate the barriers and geographical restrictions.

While studying the trends of FDI, it becomes easy to note that the investment opportunities during recent years have followed UNCTAD. The things to note are that the opportunities of FDI are reducing in the developed countries and moving towards the developing nations and have greatly contributed to its increase. Another thing you cannot overlook is that the efforts by certain countries such as India have doubled and the financial crisis that occurred in 2008 has resulted in this situation. When it comes to choosing the destination of FDI, there are various factors to keep in mind.

For attracting more multinationals to come to India, it is based on the ability to enhance the competitive edge and factors such as improved communication networks like transport, presence of skilled labor and the opportunities of learning backed by the presence of knowledge stream play an important role for selecting a location. According to further perspectives, the local organizations also play a significant role in attracting FDI such as the regional, sub-regional, and the national entities, the private service providers, chambers of commerce and the educational organizations.

Considering various factors

For encouraging FDI in India, the actions taken by the government agencies to improve the environment in the host country encourages more opportunities for investment. For improving the image of the country and creating a good business environment, various factors are to be taken into consideration. For instance, the public money should be used properly to improve the infrastructure, reduce the level of corruption, develop corporate finance, and educate the people properly for the creation of knowledgeable and skillful workforce instead of trying to promote the country through the marketing and advertising campaigns.

Factors of FDI

When planning the India entry strategy, various elements affect the choice of FDI such as the states, trade unions, and the legal restrictions, economic activities, a subsidy of international activities, and the taxes. In addition to this, the presence of companies of a certain country is likely to attract more companies from that country. The other factors that are likely to affect the FDI are weak institutions and the bad state of infrastructure. Besides this, the cooperation of different companies forming the same business groups also generates plenty of benefits such as the exchange of information and the reduction of implementation and operation.

The final call

The ability to attract FDI rests on two primary factors namely, the location of the host country and the multinationals. For the governments of the developing countries enabling access to FDI increases economic development and leads to the creation of more jobs. Therefore, governments must try to focus on strategic factors that are friendly for attracting foreign direct investment. While the business environment must be conducive, the governments must engage in marketing activities for improving the image of the country. In India, the foreign direct investment plays an important role in adding more value to the economy as companies depend on the multinationals to invest for achieving economic growth. For investing in Indian companies, the details of the company website must communicate attractive features about the country or the city that intends to welcome foreign investors. A favorable climate of investment can eliminate all the barriers for foreign investment in India.

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