Introduction India is fast gaining importance world-wide as the country has become an investment hub over the last

decade. Global investors have retained their faith in the resilient Indian economy even during the toughest of the times. As a result, India enjoyed high foreign inflows and investments when rest of the world was struggling to even survive. FDI

Foreign direct investment (FDI) is investment by a company in a country other than that in which the company is based either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. Trends in FDI Inflows to India The attractiveness of India as a preferred investment destination could be ascertained from the large increase in FDI inflows to India. The significant increase in FDI inflows to India reflected the impact of liberalisation of the economy since the early 1990s as well as gradual opening up of the capital account. As part of the capital account liberalisation, FDI was gradually allowed in almost all sectors, except a few. Current Scenario in India In September 2012, Government of India allowed FDI; in aviation upto 49%, in Broadcast sector upto 74%, in multi-brand retail upto 51% and in single-brand retail upto 100%. 1) Only one non-resident entity, whether owner of the brand or otherwise, shall be permitted through a legally tenable agreement with the brand owner. 2) With respect to proposals involving FDI beyond 51%, sourcing of 30% will be done from India (earlier mandated only from SMEs). This would allow retailers with specialized/high technology niche products to build production capacities in the country, catering specifically to their sourcing requirements.
100% single brand FDI notification with the requirement of 30% local sourcing. "The move will attract investment, create employment," Sharma said. "For FDI proposals beyond 51% in single brand retail, 30% sourcing from 'Small Industries' has been made mandatory. 2)

3) the stores will be restricted to operate in cities with a population greater than 1MM. In States/ Union Territories not having cities with population of more than 1MM as per 2011 Census, retail sales outlets may be set up in the cities of their choice.

FDI inflows up 36% in Jan-Oct

Foreign direct investment in India surged by 36% during the January-October period this year despite uncertain global economic uncertainty. The sectors that attracted maximum FDI during the nine-month period include services (financial and non- financial), telecom, housing and real estate, and construction and power. Advantages of Foreign Direct Investment Foreign Direct Investment has the following potential benefits for less developed countries. 1. Raising the Level of Investment: Foreign investment can fill the gap between desired investment and locally mobilised savings. 2. Upgradation of Technology: Foreign investment brings with it technological knowledge while transferring machinery and equipment to developing countries. Production units in developing countries use out-dated equipment and techniques that can reduce the productivity of workers and lead to the production of goods of a lower standard. 3. Improvement in Export Competitiveness: FDI can help the host country improve its export performance by raising the level of efficiency and the standards of product quality. Further, because of the international linkages of MNCs, FDI provides to the host country better access to foreign markets 4. Employment Generation: Foreign investment can create employment in the modern sectors of developing countries. Recipients of FDI gain training of employees in the course of operating new enterprises.

5. Benefits to Consumers: stand to gain from FDI through new products, and improved quality of goods at competitive prices. 6. Resilience Factor: FDI has proved to be resilient during financial crisis. For instance, in East Asian countries such investment was remarkably stable during the global financial crisis of 1997-98. In sharp contrast, other forms of private capital flows like portfolio equity and debt flows were subject to large reversals during the same crisis. Similar observations have been made in Latin America and in Mexico. In addition to risk sharing properties of FDI, it is widely believed that FDI provides a stronger stimulus to economic growth in the host countries than other types of capital inflows. It offers access to internationally available technologies and management know-how. 7. Revenue to Government: Profits generated by FDI contribute to corporate tax revenues in the host country. Disadvantages of Foreign Direct Investment FDI is not an unmixed blessing. Governments in developing countries have to be very careful while deciding the magnitude, pattern and conditions of private foreign investment. Possible adverse implications of foreign investment are the following: 1. When foreign investment is competitive with home investment, profits in domestic industries fall, leading to fall in domestic savings. 2. Contribution of foreign firms to public revenue through corporate taxes is comparatively less because of liberal tax concessions and tariff protection provided by the host government. 3. Foreign firms increase income inequalities. They create a small number of highly paid modern sector executives. They divert resources away from priority sectors to the manufacture of sophisticated products for the consumption of the local elite. As they are located in urban areas, they Create imbalances between rural and urban opportunities. 4. Foreign firms stimulate inappropriate consumption patterns through excessive advertising and monopolistic market power. The products made by multinationals for the domestic market are not necessarily low in price and high in quality. Their technology is generally capital-intensive which does not suit the needs of a labour-surplus economy. 5. Foreign firms able to extract sizeable economic and political concessions from competing governments of developing countries. Consequently, private profits of these companies may exceed social benefits. 6. Continual outflow of profits is too large in many cases, putting pressure on foreign exchange reserves. Foreign investors are very particular about profit repatriation facilities. 7. Foreign firms may influence political decisions in developing countries. In view of their large size and power, national sovereignty and control over economic policies may be jeopardized. In extreme cases, foreign firms may bribe public officials at the highest levels to secure undue favours. Similarly, they may contribute to friendly political parties and subvert the political process of the host country.

Globalisation
Globalization refers to in which activities of large number of business enterprises is carried out in many different locations across national boundaries. It is much more than just importing or exporting from one country to another. True globalization involves one firm procuring form, manufacturing in, and selling in many different countries. There has been an increasing trend in the world towards globalization is characterized by trends such as:

Increased trade across national boundaries. One company having subsidiary companies and plants in many countries. One company procuring material required from multiple countries. One company selling its products in many different countries. Growth of joint ventures and technical collaborations between companies from different countries. Lowering of trade barriers and simplified import and export procedures. Causes:
There are many causes of globalisation such as Technology, Availability of cheap goods/services, Big companies expanding their territory ( i.e TNCs), Economies , Profit and others.

Causes:

Main Reasons that have caused Globalisation

1. 2. 3. 4. 5. 6. 7. 8. Improved transport, making global travel easier Improved Technology which makes it easier to communicate and share information around the world. E.g. Internet Growth of multinational companies with a global presence Growth global trading blocks which have reduced national barriers. (e.g. European Union) Reduced Tariff barriers encouraging global trade Firms exploiting gains from economies of scale to gain increased specialisation. Growth of global media Global Trade Cycle. Economic growth is global in nature. This means countries are increasingly interconnected. (e.g. recession in one country affects global trade and invariably causes an economic downturn in major trading partners.) 9. Financial system increasingly global in nature. When US banks suffered losses due to sub-prime mortgage crisis, it affected all major banks in other countries who had bought financial derivatives from US banks and mortgage companies. For the

negative impacts:
Since the markets are all globally connected together when one market falls, the worlds economy collapses. Let us take the United State financial crisis that is currently happening for an example. The US market turned into a disaster because of sub-primary mortgages and the products derived from them. Financial companies started to give out mortgages without checking peoples credibility. Therefore, people who could not afford mortgages also got mortgages. Eventually, the crisis started because people could not pay for the mortgages anymore. Banks and financial companies have all these houses that people would not buy because no one has the money to afford a new house. Finally, banks and financial companies went bankrupt. US stock markets collapsed. Other countries g ot affected because the worlds biggest buyer, United State, suddenly stopped buying. Worlds economy slowed down and, eventually, the market collapsed.

Globalization gas some disadvantages also: Unrestricted globalization can hamper the development of less developed countries. Developed countries can stifle development of undeveloped and under-developed countries. Companies face much greater competition. This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale and therefore may be forced out of business. Countries become increasingly dependent on other countries for meeting their needs for goods and services. This can become a major disadvantage in situations like war. Adverse economic condition in one country can escalate to other countries and may even adopt global proportion.

Globalization causes unemployment in industrialized countries because firms move their factories to places where they can get cheaper workers. Globalization may lead to more environmental problems. A company may want to build factories in other countries because environmental laws are not as strict as they are at home. Poor countries in the Third World may have to cut down more trees so that they can sell wood to richer countries.

Good sides
Globalization offers many advantages to the people and businesses. These include:
1.

Globalization lets countries do what they can do best. If, for example, you buy cheap steel from another country you dont have to make your own steel. You can focus on computers or other things. Globalization gives you a larger market. You can sell more goods and make more money. Businesses and

2. 3.

investors get much wider opportunities for investment. Consumers also profit from globalization. Products become cheaper and you can get new goods more quickly. Availability of greater variety of goods and services at competitive prices to the consumers. 4. Greater employment opportunities for people. 5. Ability of companies to achieve lower costs. 6. Faster and wider spread of new technologies across the world.
7.

Resources of different countries are used for producing goods and services they are able to do most efficiently. Companies are able to procure input goods and services required at most competitive prices.

8.