FDI Full Form
What is the full form of FDI?
The full form of FDI is Foreign Direct Investment. FDI is the investment made by companies of the host countries into the shares of other companies that operate in a foreign country. FDIs are made in those countries that have above-average economic rates, skilled workforce, and potential growth rates. FDI includes acquisitions and mergers, providing facilities, reinvesting profits and intra- company loans. It is simply called direct investment.
This is the way for businesses to expand their operations into new markets, and it can also be a big boon for the economies of the countries involved. Foreign direct investment (FDI) is an important source of capital for economies and businesses in all industries around the world. It is the purchase of a company or a significant stake in a company by a foreign investor. The foreign investor may simply purchase shares and acquire the enterprise outright in the company.
There are some of the most commonly used abbreviations, full forms and acronyms and the meaning of FDI are listed in different categories below the table.
Abbreviations | Acronyms |
Fault Detection and Isolation Hardware | FDI |
Feeder Distribution Interface Computing | FDI |
Finally Did It Internet Chat | FDI |
First Dorsal Interosseous Medical | FDI |
Flash Data Integrator Computing | FDI |
Floppy Disk Image General Computing | FDI |
Following Distance Indicator Miscellaneous | FDI |
Foreign Depository Interest Business | FDI |
Foreign Diverse Investments Business | |
Forward Defect Indicator Computing |
1. Types of Foreign Direct Investment (FDI)
There are some main types of foreign direct investment
In a horizontal FDI the same type of business operations company establishes in a foreign country as it operates in its home country. A U.S.-based cell phone provider buying a chain of phone stores. for example-china.
In a vertical FDI in another country, a business acquires a complementary business. For example - a U.S. manufacturer may acquire an interest in a foreign company that supplies it with the raw materials.
In a conglomerate FDI in this FDI foreign business invests in a company that is unrelated to its core business. Because the investing company has no prior experience in the foreign company’s area of expertise, this often takes the form of a joint venture.
2. Advantages and disadvantages
There are many advantages of FDI but here we mention only a few main advantages:
It maintains jobs in the country.
It brings new capital to the nation.
The country’s forex role also increases
It carries new skills and technologies In the nation
It increased increases prosperity and tax revenues
The investor company provides the access to a nation’s international market,
When wages are lower in the investor organization, the international target market may reduce production cost.
The investor corporation can use a country’s natural resources, such as fossil fuels, metals and so on.
FDI can maintain economic growth and foster both the country making the investment and the recipient country.
And expanding their footprints into international markets.
There are disadvantages of FDI:
This can result in loss of control over the company’s operations.
If the company may be sold to a hostile foreign investor or if the foreign investor is not interested in the company’s long-term success.
This can also be led as intellectual property to foreign investors and the transfer of valuable technology.
If the investors of foreign companies are not interested in sharing this technology with the company’s existing management or employees.
3. Risk of RDI
Foreign Direct Investment (FDI) can be a great way to grow a business and company, but it can also come with risks. When you decide to invest in a foreign company then you are taking on the risk that the company may not be successful. You are also taking on the risk of political instability in the country because we don't know where the company is located. Another risk is that the company may not be able to repay its debts, which could lead to financial losses for us. Before making a decision sure to understand the risks involved to invest in a foreign company and make sure you are prepared to take them on. Foreign direct investment is an important part of the global economy because it can be a great way for businesses to expand their operations into new markets. It can also be a big boost in the countries for the economics are involved.
4. How it works
FDI plays an important role in making foreign investments. They offer organizations access to international markets and newer national markets along with technological support. The foreign companies receiving the host countries as well as investments can gain access to advanced technology and new skill sets which can enhance economic development.
Frequently Asked Questions (FAQs)
Inward remittance through normal banking channels;
Debit to NRE/ FCNR (B) account of an AD Category I bank of the person concerned maintained this.
In India debit to a non-interest-bearing Escrow account in Indian Rupees which is opened from the approval from AD Category – I bank and is maintained with the AD Category I bank and on behalf of non-residents and residents towards payment of share purchase consideration.
Conversion of technical royalty/ lump sum/ know-how fee due for payment or conversion of ECB.
Conversion of pre-operative/pre-incorporation expenses incurred by a non-resident entity up to a limit of five per cent of its capital or USD 500,000 whichever is less.
Conversion of pre-incorporation expenses/ import payables can be treated as consideration for the issue of shares with the approval of FIPB.
Against any other funds payable to a person resident outside India, the remittance of which does not require the prior approval of the Government of India and Reserve Bank.
Swap of capital instruments provided that the Indian investee company is engaged prior to Government approval and in a Government route sector, shall be required.
A convertible Note is an instrument issued by a start-up company as debt for evidencing receipt of money initially which is repayable at the option of the holder and is convertible into a such number of equity shares of a such startup company.
Private lottery, online lotteries, Lottery Business including Government etc.
Betting including casinos and Gambling etc.
Nidhi company
Chit funds
TDRs(Trading in Transferable Development Rights)
Construction of Farm Houses and Real Estate Business
Manufacturing of Cigars, and cigarettes, cheroots, cigarillos and of tobacco or of tobacco substitutes
Sectors or activities not open to private sector investment for example. (I) Railway operations (other than permitted activities mentioned in entry 18 of Annex B).(II)Atomic energy
Schedules of FDI are 1, 2, 2A, 3, 6, 8 and 10 and the notification number of the FDI is FEMA.20/2000-RB May 3, 2000, as amended from time to time.
Investments can be made by an entity residing outside India in the form of compulsorily and mandatorily equity shares, compulsory and mandatorily convertible debentures/fully, and convertible preference shares of an Indian company through two routes- the Government route and the Automatic route.
The policy of new FDI in India further opened doors for foreign direct investment, easing the strict norms of local sourcing for single-brand retail. It also allowed 100 per cent FDI in liberalized FDI And commercial coal mining in multi-brand retail also.