The advantages and disadvantages of FDI - Notes | Study Descriptive Paper Preparation for SSC Exams - SSC CGL

FDI is investment by an individual or a company from another country. A foreign direct investor can invest in a company by means of merger or acquisition, or by setting up a new venture. Economic liberalization in 1991 opened the Indian economy to foreign investments. Advantages of Foreign Direct Investment (FDI)  Capital inflows can create higher output and jobs.  Recipient countries will benefit from improved knowledge and expertise of foreign companies. 

Investment from abroad could lead to increase in salaries and better working conditions  

• Economic Development Stimulation.  
• Can create a Resource Transfer.  
• Can lead to Increased Productivity.  
• Will result in Increase in government revenue.  
• Quality of products and flow of technology. 
• Improvement of agricultural sector. 

Disadvantages of FDI  

• It can hinder the Domestic Investment.  
• Negative Influence on Exchange Rates.  
• Destruction of small entrepreneurs.  
• Shrinking of jobs in some sector.
• No real benefit to farmers.  
• It can increase the Trade Deficit.  
• Can lead to inflation. 

Conclusion: The government should move in that route if it wants to turn the Indian economy into a developed economy since FDI is the future of India.