3 April 2015

Foreign Direct Investment in Indian Stock Market

Developing countries always need financial support in order to achieve stability in economy. Similarly, India being developing country is looking forward for foreign direct investment in order to move in a direction to become a developed economy. We all know that Indian economy is a fast growing economy and it holds highly strong position in global hub as Indian economy registers high growth figures of economy when globally there was a heavy financial meltdown. Due to this growth, investors of overseas are confident and interested to invest in India which is giving a boost to Foreign Direct Investment (FDI) in India.
Foreign Direct Investment in Indian Stock Market has increased the development of Indian stock market to many folds. FDI has helped Indian economy to grow, develop and attain financial stability globally. Foreign Direct Investment in India has helped India in overcoming many of the problems which our economy was suffering and in facing the global challenges from the global economy. Money from FDI has helped to boost those sectors of economy which needed financial motivation or boost. Indian stock market has always attracted the world’s powerful and major investors to come and invest in Indian economy. India has always tried to promote the business environment which is healthy and favourable for foreign investors and provoked them to invest in our Indian economy. Presently, FDI is allowed to invest in financial services which include banking also along with financial sector which does not include banking services. Expanding markets of India from business point of view is attracting large number of foreign investors to put their money in Indian stock market. Indian government is supporting Foreign Direct Investment in India by giving liberty to foreign investors in trade policies. Government is also trying to loosen restrictions on foreign investment which is a benefit for foreign investors and is giving them a golden opportunity to invest in Indian stock market. Technological development in India along with strong telecommunication networks is helping the foreign investors to reap benefits from Indian stock market.
There are several benefits of foreign direct investment in Indian stock market which can be listed as:
a) India’s access to global market – a developing country like India is benefitted by inviting FDI as Indian economy got the access to the global market which will help Indian economy to grow at a fast rate.
b) Advancement in technology – FDI’s have the power from which they have the ability to introduce the advanced and world class technology along with its technical knowhow which help Indian economy to progress at a faster rate. Experts from foreign also help in the up gradation of the existing technology in India which helps in saving the cost which would have been incurred if we have opted for the new technology.
c) Competition increases – Foreign Direct Invest in Indian stock market has allowed in increasing competition amongst the investors in domestic market. Competition increased due to up gradation of technology and invention of technology in India which acted a major jolt for the Indian economy and has enhanced the chances of growth of Indian economy. FDI’s have provoked the domestic companies to improve their technology in order to be competitive in the market which is a good sign o development for a developing economy.
d) Human resources in India have improved many folds – FDI provides the host country with valuable skills which are used globally and this has upgraded the skill sets of the people of host country by making them more competent and efficient. Biggest disadvantage of Foreign Direct Investment in Indian stock market is that it is increasing the aggregate demand for short run, the day foreign investors will start recovering their investment which they invested in initial outlay, and our economy will suffer to a very large extent. If the FDI schedule is not healthy it will affect the capital flow our country. All the FDI’s come with a view to earn high return on investment; if foreign investors come with this motive they will actually hamper the Indian economy in long run.
In order to conclude this article, we can say that Foreign Direct Investment (FDI) gives a kick start to the economy of India which in turns affects the Indian stock market in a positive way.

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