Question

What are some benefits of foreign direct investment? What are some criticisms? How would you respond to criticisms in light of the benefits of foreign direct investment?

Answer 1

Foreign direct investment- FDI is an investment in a business or company by other country or country's people.

Benefits of FDI- Are as following:

1. FDI increases the growth of the country, it also increases gross domestic product (GDP) of the country.
2. FDI increases employment in the country as companies get funds to increase production and they open new manufacturing units and factories, it creates employment in the country.
3. FDI boosts the economy of the country, when there is good flow of FDI in a country, country reaches at boom stage.
4. When there is flow of FDI, stock market and other financial markets touch new high.

Criticism of FDI- Are as following:

1. Political changes affect FDI in the country. Sometimes new Government can impose new taxes, duties and charges that can demotivate the FDI.
2. Exchange rate keeps on changing, if one currency appreciates or depreciates with respect to other currency, this also affects FDI.
3. FDI sometimes can be risky as economic changes, slowdown and recession can lead less flow of FDI.

Conclusion- Everything has its own pros and cons, same with FDI. Despite some disadvantage, FDI is still good for country, it increases the economic growth and employment in the country.