Index Foreign Direct InvestmentWhy is FDI better than FDI in India? Need for Foreign Direct Investment in IndiaCurrent Scenario of Foreign Direct Investment in IndiaInvestmentsGovernment InitiativesConclusionGlobalization is the free movement of goods, services and people across the world in a smooth and integrated manner. Globalization may be thought of as the result of the openness of the global economy and the concomitant increase in trade between nations. In other words, when countries hitherto closed to foreign trade and investment open their economies and become global, the result is a growing interconnectedness and integration of the world's economies. This is a brief introduction to globalization. Globalization is based on the theory of comparative advantage according to which countries that are good at producing a particular good are better off exporting it to countries that are less efficient at producing that good. In contrast, the latter country can export the goods it produces efficiently to the former country which may be deficient in the same. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Foreign Direct Investment Foreign direct investment (FDI) is investment made by a company or individual in one country into business interests in another country, in the form of starting business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Foreign Institutional Investor – FII A foreign institutional investor (FII) is an investor or investment fund registered in a country other than the one in which it is investing. Institutional investors notably include hedge funds, insurance companies, pension funds and mutual funds. The term is most commonly used in India and refers to external companies that invest in Indian financial markets. An FII is any type of large investor that operates in a country other than the country where the investment instrument is purchased. In addition to the types of investors mentioned above, others include banks, large corporate buyers, or representatives of large institutions. All FIIs take a position in a foreign financial market on behalf of the home country in which they are registered. Why FDI is better than Foreign Direct Investment Undoubtedly, Foreign Direct Investment (FDI) as it is more durable and committed, if I may say so, than FII (foreign institutional investment) which is loose and hot. China has been fortunate to attract significant foreign direct investment. In all these years, India has been fortunate to attract foreign direct investment, which has made our stock markets popular, but not foreign direct investment in a big way. But, in recent times, there has been a discernible trend in this shift and, in fact, FDI was slightly higher than FIIs last year. Need for Foreign Direct Investment in India The need for increased foreign direct investment exists because India is at a stage where it needs not only foreign investment, but also technology and management policies to sustain and enhance economic growth. In 2006, foreign direct investment (FDI) in India amounted to $37 billion, of which only $5 billion came from the United States. This is not very encouraging given the objective of increasing GDP by 34-36%. Therefore, there is a need for more foreign direct investment. Indiait still requires an FDI component equal to 4% of GDP. The United States needs to invest more in various sectors of the Indian economy. There is potential to attract more foreign direct investment in sectors such as infrastructure, IT hardware, automobiles, leather, textiles, gems, jewelery and the financial sector. Therefore, India is considered the second best economy to invest in, after China. Surprisingly, the United States is ranked 3rd in this area! The focus is on the insurance and banking sector, in the context of foreign direct investment. Only 10% of the insurance sector has been tapped for foreign investment. Foreign companies must persuade parliament to increase the capital of foreign direct investment. The banking sector is undergoing liberalization which will continue until 2009. The insurance sector is eager to raise capital as more and more foreign direct investment occurs. So the insurance sector is also aiming for liberalization, taking inspiration from the banking sector. The need for increased foreign direct investment requires consideration of important issues and areas, such as: Market potential and accessibility Political stability Market infrastructure Easy currency conversion. India is an ideal country to make foreign direct investment because of its characteristics such as: Developing economy Low wage employees Low wage workers Abundant human resources Large private economy India expects a high growth rate of almost 16 % – double the current 8%. Hence, there is a clear need for more foreign direct investment. Furthermore, FDI prospects should be bright if liberalization is initiated in the telecom sector as well. Brands like Hutchison, Vodafone and Singtel are already present in the Indian market and thanks to these investors the FDI capital in this sector has risen to 74%. There are other needs that larger FDI will satisfy, namely job creation, income generation, technology transfer and economic stability. Therefore, the need for more foreign direct investment is an urgent situation these days in India. Foreign countries are well aware of this and many of them are taking further steps to invest in the Indian economy. Need For Fii in India Economies like India, which offer relatively higher growth than developed economies, have gained favor with investors as attractive investment destinations. for foreign institutional investors (FIIs). Investors are optimistic about India and sentiment is favorable following the government's announcement of a series of reform measures in recent months. According to the Global Capital Confidence Barometer (CCB) – Technology report by Ernst & Young (EYs), India ranks third among the most attractive investment destinations for technology transactions in the world. India has the third largest start-up base in the world with over 4,750 technology start-ups and around 1,400 new start-ups founded in 2016, according to a report by Nasscom. The current scenario of foreign direct investment in India Apart from being a critical driver of economic growth, foreign direct investment (FDI) represents a major source of non-debt financial resources for India's economic development. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges like tax exemptions, etc. For a country where foreign investments are made, this also means acquiring technical know-how and generating employment. The Indian government's favorable policy regime and robust environmententrepreneurs have ensured that foreign capital continues to flow into the country. The government has taken several initiatives in recent years, such as easing FDI norms in sectors such as defence, oil refineries PSUs, telecom, power exchanges and stock exchanges, among others. Market Size FIIs' net investment in Indian equities and debt hit record highs in the last financial year, supported by expectations of an economic recovery, falling interest rates and improving earnings prospects. FIIs' net investments in Indian equities and debt stood at $7.46 billion in 2016-2017 (till April 14, 2017). Private equity (PE) investments in the logistics sector grew 9% to $501.71 million during 2016-2017 and are expected to grow 8.6% annually during 2015-2020 on the back of greater opportunities arising from low barriers to entry and Goods and Services Tax (GST). Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay Investments Flipkart, India's largest e-commerce marketplace, has raised $1 billion in a funding round led by Chinese internet giant Tencent and Microsoft's e-commerce unit.Paytm raised 200 million dollars in a funding round led by Chinese e-commerce giant Alibaba and existing investor SAIF Partners. The Caisse de Dépôt et Placement du Québec (CDPQ), Canada's second-largest pension fund, plans to invest approximately $155 million to acquire a minority stake in TVS Logistics Services Limited, a private subsidiary of the TVS Group. International Finance Corp (IFC), together with IFC Global Infrastructure Fund, the PE fund of IFC Asset Management Company, announced a $125 million investment in shares of Hero Future Energies. The World Bank Group has committed to providing $1 billion for India's solar energy projects and plans to work with other multilateral development banks and financial institutions to develop financial instruments to support future solar energy development in the village. Goldman Sachs' PE fund plans to invest $200-250 million in Essel Highways, the road infrastructure arm of the Essel Group, which could make it one of the largest PE transactions in the sector. ReNew Power Ventures Pvt Ltd, a renewable energy producer, has signed a US$250 million debt financing agreement with Overseas Private Investment Corporation (OPIC), the US government's development finance institution, which will be used to build up to 400 megawatts (MW) of new solar power projects in India across multiple states. Godrej Fund Management (GFM), the real estate fund management arm of Godrej Properties, has raised $275 million from Netherlands-based APG Asset Management NV, which will be used to invest in residential projects in India. 65.37 million) to acquire an equity stake in Gurgaon-based hotel development and investment start-up SAMHI Hotels, which will help fund SAMHI's expansion plans. Singapore-based investment firm Temasek Holding has acquired 73% stake in Hyderabad-based Care Hospitals, India's fifth-largest private healthcare network, for Rs 1,800 crore ($266.83 million ). Government Initiatives The Indian government plans to work towards increasing India's weight in the MSCI Emerging Markets index, in order to increase the inflow of foreign portfolio investors (FPIs) into the economy. The Indian government and the World Bank signed on.