Foreign Investment and Trade

637 Words Feb 3rd, 2018 3 Pages
Foreign capital, which actually plays an important role in increasing productivity of labor and accumulation of foreign reserve in developing countries to meet the current account deficit , is consist of foreign direct investment (FDI) and foreign portfolio investment(FPI). Both have worked as an instrument of global economic integration and stimulation. Apart of providing access to the foreign capital FDI also offers modern era technology, tools of creativity, desired skill sets and other complementary skills. In addition of producing additional economic activity and generating employment, foreign investment facilitates in flow of sophisticated technology.
The FDI creates capacity in the form of physical and logical infrastructure. The FPI, which is for short span of time, creates liquidity in the market and it is being invested in domestic financial markets such as capital market, money market, foreign exchange market etc. In this strong inclusive growth environment, the Indian economy is experiencing a robust development during 2006-07. The real Indian GDP growth has gone up to 9.3 percent in the first quarter of 2007-2008 from the level of 9.0 percent in 2005-06, advanced by double-digit growth in both the service and industrial sectors (Malayendu Saha 2009). The increasing trend in Indian economy has made India among one of the fastest growing states in the world.…
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