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:
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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