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Foreign Direct Investment – FDI

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Foreign Direct Investment – FDI

You might have heard it all over the finance news channels, news papers etc. At the time of the budget they come into our ears quite often.I’m sure you would have wondered what is this FDI- Foreign Direct Investment. Those of the finance gurus out here would be ready with the answer, but we have to allow the new guys on the dock too.

This post is for those who need to know what an Foreign Direct Investment is. So lets get to the point. In very simple terms we can say that If a company makes an investment in another country on a business or entity  It would be called Foreign Direct Investment. Do not get the idea misguided, if a company that is foreign invests indirectly on portfolio, it would not be treated as Foreign Direct Investment or FDI. With the investment the Foreign company would have some controlling power over the invested Company.

An example of foreign direct investment would be an Indian company taking a majority stake in a company in America.

Another example would be a Indian company setting up a joint venture in China.

Every country would have some regulations about the percentage of investment that can be made in their companies.