Question

How do different kind of capital short and long-term, as well as long term foreign direct investments affect development prospects?

Answer 1

Capital is a very important factor for the growth of a nation, There are certain ways wherein the government or companies can raise short term and long term capital. These may include issuing of government bonds, Bills, Notes, Tenders, Investment in real estate, etc. However since most of the nations cannot meet the capital resources from internal sources itself, they turn to Foreign Investors.

Foreign Direct Investment is a major means where investors can invest in an overseas economy. The investments are directly made in the productive assets of another nation. When Foreign investors decide to invest in any economy they consider multiple factors such as the GDP growth trends, Taxation benefits, Political stability, etc.

Foreign Direct Investment can affect Growth prospect in many aspects such as development of infrastructure, manufacturing facilities, service hubs, which helps in economic growth as well as gives an impetus to employment. It helps in making international trade easier through reduction of tariffs. FDI's also help in creating skilled labour. Investors bring in their money as well as their experience that helps in increasing productivity. In a nutshell the entire community and economy begins to grow.