Foreign Direct Investment (FDI) FDI is when a foreign entity | UPSC Current Affairs Daily

Foreign Direct Investment (FDI)

FDI is when a foreign entity acquires ownership or controlling stake in the shares of a company in one country, or establishes businesses there.
It is different from foreign portfolio investment where the foreign entity merely buys equity shares of a company.
In FDI, the foreign entity has a say in the day-to-day operations of the company.
FDI is not just the inflow of money, but also the inflow of technology, knowledge, skills and expertise/know-how.
It is a major source of non-debt financial resources for the economic development of a country.
FDI generally takes place in an economy which has the prospect of growth and also a skilled workforce.
FDI has developed radically as a major form of international capital transfer since the last many years.
The advantages of FDI are not evenly distributed. It depends on the host country’s systems and infrastructure. 
The determinants of FDI in host countries are:
Policy framework
Rules with respect to entry and operations/functioning (mergers/acquisitions and competition)
Political, economic and social stability
Treatment standards of foreign affiliates
International agreements
Trade policy (tariff and non-tariff barriers)
Privatisation policy