Distinguish Between Foreign Trade And Foreign Investment

In the digitalised world Globalization is the formula of connecting with the production, selling, and investing across countries have become an important phenomenon.

Globalization has integrated the market all around the world and created the world into one single Market Place where everyone is connected to each other. Therefore, MNC s and Foreign Trade can be considered agents of globalization.

What is Foreign Trade?

Foreign Trade means the purchase and sale of goods and services across the international border. In the Globe, no country has all the resources. Every country is dependent on each other resources, so in order to fulfill the needs, one country imports a commodity that they have in scarcity from other countries which have it in excess and it forms the basis of foreign trade.

Type of Foreign Trade

1.. Import Trade

Import Trade means when you purchase goods and services from other countries to your home country. Home countries purchase those goods which they have in scarcity from other countries.

2.. Export Trade

means when the sale of goods and services to other countries from Home countries. Home countries export those goods which they have in abundance and hence sell those goods in international markets.

3.. Entrepot Trade

It is a kind of trade mechanism where countries purchase products and services from one country, remodel and then sell them in other countries.

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what is Foreign Investment?

Foreign Investment means the inward and outward flow of capital through which Individual foreign companies and individuals invest in developing and underdeveloped countries to take the benefits of resources at cheaper rates.

Foreign Investment is another form of International business. through this type of investment, foreign entities or individuals set up their businesses or manufacturing units in other countries or get a share in the existing businesses of other countries.

Modern technology and resources are the advantages of foreign investment which is one of the major reasons why the government tries to attract more foreign investment.

Foreign Investment in India

According to RBI, foreign investment means any investment made by a person /resident outside India on a repatriable basis in equity shares, convertible debentures, convertible preference shares, and share warrants. of an Indian company or to the capital of an LLP.

Type of Foreign Investment

1. Foreign Direct Investment (FDI)

When the Home country invites the capital by allowing foreign companies to produce and sell in their country such investment is called FDI (Foreign Direct Investment)

Foreign Companies directly set up their manufacturing plants and collaborate with Indian companies to do so.

2.. Foreign Portfolio Investment

FPIs, or Foreign Portfolio Investors, are overseas companies that are registered in India and intend to invest in Indian securities listed on exchanges.

They are regulated by the Securities and Exchange Board of India (SEBI) and the ceiling on such investments is maintained by the Reserve Bank of India (RBI).

Know the Distinguish Between Foreign Trade And Foreign Investment

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