FDI and Its Effect on Investors

Foreign Direct Investment India has faced a resurgence with the Make in India programme. India has already distinguished itself as one of the top growing economies in the world, ranking among top 3 excellent destinations for inbound investment. Since Liberalisation during the 1990s, India has experienced a more investor friendly climate where FDI inflows are encouraged.

The million dollar question that policy makers ask is whether foreign investors will really go for Indian markets. How do concerns like consistent economic slowdown, increasing corruption, lack of reforms and shallow financial markets work out? Will FDI investors ignore these factors or will they consider them?

Foreign Direct Investment India attraction based on a host of counter reasons such as its strong demographic profile and attractive opportunities for growth.

FDI has an impact on investors and distinguished law firms can guide them to the safety net. With the government looking to widen investor base, lower market volatility and deepen the Indian capital market, internal reforms and safety nets are already in place for existing Indian retail investors from the domestic market.

FDI allows free flow of capital and permits capital to seek the highest return rate. Diversifying lending and investment are possible effects of FDI on domestic investors. Gains to host countries from FDI can take numerous firms other than this. FDI permits the transfer of technology. How so? Well, the foreign direct investments facilitate transfer of new capital inputs which would otherwise not be possible through mere financial investment in goods or services.

Moreover, FDI promotes competition in the domestic input market and forces investors to think outside the box. Human capital development in India is only possible if FDI comes in and new businesses open. Profit generation by FDI also adds to corporate tax revenues. FDI can have a lot of benefits. One such, for any developing country (including India) is that unlike short term debts, direct investments in the nation cannot move out in the event of a crisis.

This boosts investor confidence and makes businesses more profitable. But while making investments in a changing economic climate with FDI flowing in, investors should also make sure they have quality legal aid to guide them through the investing process. Another question asked by thinkers and experts is whether the benefits of FDI are enough to offset the risk of allowing capital across the border of developing countries?

Given the huge positive impact on the host nation, the answer appears to be a resounding yes. FDI also contributes to a better investment ecosystem by increasing the level of education in the country.

Conclusion

Changing the investment climate across host nations, FDI has the potential to transform the economy and help the investor. But it has several drawbacks as well. Increasing complications in the market require businesses in the investment industry to ensure they have access to competent legal aid. This is what can make FDI a win-win situation for big and small businesses alike.

Uday Singh Ahlawat is a partner at Ahlawat & Associates which is a leading law firm in India offering foreign direct investment services and help for setting up business in India.