NTA UGC/NET/SET/JRF Commerce Paper 2 - 2024, | 2023 Fully solved paper | 4th Edition, Includes 2023 Solved Papers |

Foreign Investment and Balance of Payments

FOREIGN DIRECT INVESTMENT (FDI)

In imperfect market conditions, multinational corporations (MNCs) try to take advantage of their supremacy over the rivals in terms of cost, quality, speed and flexibility. They try to expand their operations in different potential countries and for that matter adopt entry strategies based on SWOT analysis and choose a particular mode of entry.

Assume that our saving rate (or sort of capital formation) is 30% of GDP, in case we want to grow at 9%, the saving rate should be 38% of GDP. Then we may try to cover the gap through FDI, where the company of one nation puts up a physical investment into building a facility in another country. The direct investment made to create ...