Chapter 11 Foreign Direct Investment and Internati...
Lead-in
Singapore was the top source of foreign direct investment into India for the second consecutive financial year, accounting for about 30 percent of FDI inflows in 2019-2020.In the past two financial years, FDI from Singapore has surpassed that from Mauritius.In the last financial year, India attracted $14.67 billion in FDI from Singapore, whereas it was $8.24 billion from Mauritius, according to the data of the Department for Promotion of Industry and Internal Trade (DPIIT).
In 2018-2019, FDI from Singapore aggregated at $16.22 billion, while that from Mauritius was $8.08 billion.According to experts, Singapore has been able to outpace Mauritius with its ease of doing business policies, simplified tax regime and a large number of private investors.In 2017-2018, FDI inflows from Mauritius stood at $15.94 billion and from Singapore, it was $12.18 billion.FDI in India rose by 13 percent—the sharpest pace in the last four fiscals—to a record $49.97 billion in 2019-2020, according to the data.
Total FDI into India including re-invested earnings and other capital in the last fiscal grew by 18 percent to $73.45 billion as against $62 billion in 2018-2019.Foreign investments are considered crucial for India as it needs huge investments for overhauling the infrastructure sector such as ports, airports and highways to boost growth.FDI helps in improving the country’s balance of payments and strengthen the rupee value against other global currencies,especially the US dollar.
Source: Money Control, May 29, 2020, https://www.moneycontrol.com/news/business/economy/singapore-top-source-of-fdi-in-fy20-with-investments-worth-14-67-billion-5334491.html
In this chapter we deal with direct investment, which is another form of long-term investment.It differs from portfolio investment in some aspects, the most important of which is the degree of control exerted by the investor over the firm invested in.Foreign direct investment refers to the process of buying and controlling a firm in one country by the residents of another country.Thus, instead of talking about the choice among securities, as in the case of portfolio investment, we now switch to a consideration of the choice among competing investing projects.A typical decision-making situation is the choice between serving a foreign market by exporting or by establishing a subsidiary or a production facility in the foreign country.