Foreign Direct Investment (FDI) has become a very popular means of transfer for capital flows from one

country to another. In short, FDI refers to an investment in which an entity for another country invests capital in some income generating assets in another country and maintains full or partial control over such assets acquired. There are several benefits of foreign direct investment which accrue to both the home country as well as the host country. However, it must be noted that such benefits accrue only when appropriate regulation and an ethical sense of doing business exists with the home country, the host country as well as the foreign investor. Some benefits of foreign direct investment are mentioned below.

1. Technological Gap: Generally, it is seen that underdeveloped economies or developing economies have a very low level of technology. Although there may be opportunities and resources which can be used to have economically viable production, however, technology may be a huge constraint to utilize such resources. Here, foreign investors from developed countries can provide the needed technical assistance to such countries. The gains can be shared in the form of royalties or a share of profits from such investments.

2. Exploitation of Natural Resources: Many-a-times it is seen that underdeveloped and developing countries have abundant natural resources, but they do not possess the needed technical and managerial expertise to exploit these resources. FDI helps such countries get access to the needed technical expertise resulting in higher income for the governments and local communities.

3. Employment Generation: FDI in a host country results in the generation of jobs for both skilled and unskilled labor. The foreign investors open offices and factories which require people to work. Employment ultimately leads to better living conditions and higher standards of living among the workers.

4. Development of Managerial Pool: Often it is seen that such MNCs develop managerial talent. Firstly, these companies provide their own seasoned and developed managers to setup and run the entity in the host country, while doing so, these managers also seek to develop the next set of managers who will take over the reins and these managers are appointed from the host country mostly due to them having better knowledge of the local market.

Benefits Of FDI

FDI is the abbreviated form of Foreign direct investment and refers to the long term involvement of one country with another country. This usually involves participation in joint-venture, management, transfer of expertise and technology etc. Foreign Direct Investment is a part of most economies of the world today and plays a key role in the development of a countrys economy. FDI is now a fundamental part of the global financial system. There are various national policies and plans designed for the having an effective government control on FDI. There are many benefits of FDI both for the investors and the country where investment is being done. Some of these advantages include:

1. Helps in economic growth. The inflow of foreign direct investment helps in the economic growth of a country.

2. Aids to improve trade. Foreign Direct Investments opens up a wide spectrum of opportunities in the trading of goods and services. This is true both for export and import production. The increased amount of FDI inflow leads to the manufacture of superior quality products that can be sold at higher prices and are suitable for being exported to other countries.

3. Brings employment opportunities. FDI inflow results in an increase in the number of employment opportunities for people living in that country. New industrial units are set up affording employment to people from the top level to the working groups like factory workers.

4. Aids in transfer of technology and knowledge. The inflow of FDI aids in the transfer of technology and knowledge from one country to another. For instance, the people of Asian countries like India had vast knowledge related to IT sector which was later used by many other non Asian countries of the world. Thus, FDI helps in the transfer of knowledge across the world.

5. Benefits to the government. Foreign direct investment helps in increasing the sources of government income. With the increased flow of FDI the income generated through taxation increases thus, bringing higher revenues to the government.

6. Improves productivity. FDI plays an important role in enhancing the overall productivity in the host countries.

7. Benefits for the investors. FDI is also quite beneficial for countries that make investments in other countries. Their companies get opportunities for exploring new global markets, thereby generating higher incomes and profits.

8. Benefits to businesses. Business entities get easy loans at low rates of interest. These facilities are extremely beneficial for small and medium-sized businesses that otherwise face many problems in getting loans.

Although the local conditions of a country, such as the development of financial markets and the educational level of people living there can an affect the overall impact of FDI on financial and economic growth., on the whole, the FDI has a positive impact for both the investors and places where investment is being done. FDI should be promoted in all parts of the world.