Foreign Direct Investment in India

FOREIGN DIRECT INVESTMENT IN INDIA

BASIL KHAN

FINAL PAPER

CONTENTS

Introduction…………………………………………………………………3

Causes of Investment in India……………………………………………….3

FDI in India does not match its potential……………………………………5

History of Foreign Direct Investment in India……………………………...6

Advantages of FDI in India…………………………………………………8

Disadvantages of FDI in India………………………………………………8

Nokia………………………………………………………………………...10

Coca-Cola……………………………………………………………………11

Conclusion…………………………………………………………………...12

Bibliography…………………………………………………………………15

INTRODUCTION

Foreign Direct Investment is defined as one company from a certain country making a physical investment in terms of an office, factory, machinery or any other equipment that assists in promoting a business. Over the past two decades however, the definition is beginning to broaden to include direct acquisitions of foreign firms, mergers with local companies, investment in a joint venture or a strategic alliance with local companies. Some common reasons as to why companies take part in Foreign Direct Investment (FDI), is to avoid foreign government pressure for local production, circumvent trade barriers, increase production capacity and exercise opportunities for co-production by setting up joint ventures with local partners.

Before a company embarks on Foreign Direct Investment, it takes into account a few factors of the host country. Some of these factors are, assessing resources in the host country, assessing competition with other companies in the same industry (local or foreign), analyzing the market in the host country and predicting outcomes from the market in the host country.

The first Europeans in India were the Portuguese in 1498 to create trade and business, however India’s first major experience with a multinational corporation (MNC) and Foreign Direct Investment was back in the 17th century, with the arrival of the British East India Company. The East India Company was...