IMPACT OF FORIGN DIRECT INVESTMENT IN ECONOMICS

Abstract

Now a day’s the Foreign Direct Investment i. e. FDI has played an important role in world’s economic development and export success, According to the Ministry of Commerce, foreign invested enterprises account for over half of world's exports and imports; they provide for 50% of globalize industrial output, and generate 30% of industrial profits while employing only 20% of labor – because of their high productivity. Foreign market entry strategies are numerous and imply a varying degree of risk and of commitment from the international firm. In general, the implementation of an international development strategy is a process achieved in several steps. Indirect exporting is often used as the starting point; if the results are satisfactory, more committing agreements are made by associating local firms. When an organization has made a decision to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. Evidence on technology spillovers is more limited, but industries with higher FDI seem to have higher productivity increases than other industries, suggesting a positive effect.