undefined | unit 4 role of government

UNIT IV

Role of Government

Q1) Define Fiscal policy.

A1)

Meaning:

Fiscal policy is associated with increased government revenues and the generation of government spending. To generate income and bear spending, governments formulate policies called budgetary or fiscal policies. Therefore, fiscal policy is related to government spending and government revenue. Fiscal policy determines the size and pattern of government-to-economy and economy-to-government spending flows. So, broadly speaking, fiscal policy is

"That part of national economic policy, which is mainly related to the balance of the central government."

In other words, fiscal policy refers to government policy on taxation, public spending, and public borrowing.

Q2) What are the main objectives of India's fiscal policy?

A2)

Main objectives of India's fiscal policy:

1. Effectively mobilize resources to ensure development:

An important purpose of fiscal policy is to ensure rapid economic growth and development. This goal of economic growth and development can be achieved by mobilizing resources in the right way. India's central and state governments have used fiscal policy to mobilize resources. Financial resources can be mobilized by:-

2. Taxation:

Through effective fiscal policy, the government aims to mobilize resources with both direct and indirect taxes.

3. Public savings:

Resources can be mobilized through public savings by reducing government spending and increasing the surplus of businesses in the public sector.

4. Personal savings:

Through effective financial measures, such as tax incentives, governments can source resources from the private sector and households. Financial resources can be mobilized through government bonds, government loans by issuing government bonds, loans from domestic and foreign stakeholders, and deficit finance.

5. Efficient allocation of limited financial resources:

Central and state governments have attempted to efficiently allocate available resources. These resources will be allocated to development activities, including spending on railroads and infrastructure. Non-development activities, on the other hand, include spending on defence, interest payments, subsidies and more. Socially desirable service. Therefore, India's fiscal policy is designed in a way that encourages the production of desirable commodities and discourages socially undesirable commodities.

6. Reducing income and wealth inequality:

Fiscal policy aims to achieve equity or social justice by reducing income inequality between different sectors of society. Direct taxes, such as income tax, are levied more on the wealthy than on the low-income. Indirect taxes are also high for semi-luxury and luxury items that are mainly consumed by the upper middle class and upper class. The government is investing a significant portion of its tax revenues in implementing poverty alleviation programs to improve the condition of the poor in society.

7. Price stability and inflation control:

One of the main goals of fiscal policy is to curb inflation and stabilize prices. This requires monetary action, and the government is constantly aiming to curb inflation by reducing budget deficits, introducing tax-saving schemes, and productive use of financial resources.

8. Job creation:

Responsible governments make every possible effort to increase employment in the country through effective fiscal measures. Investing in infrastructure has resulted in direct and indirect employment. Lowering taxes and tariffs on small industry (SSI) units encourages more investment and, as a result, creates more jobs. The Government of India is implementing various rural employment programs to solve problems in rural areas. Similarly, the self-employed system is adopted to provide employment to technically qualified people in urban areas.

9. Balanced regional development:

Another main purpose of fiscal policy is to bring about balanced regional development. From the government, there are various incentives to launch projects in the underdeveloped areas, such as cash subsidies, tax concessions, obligations in the form of tax exemptions, and loans at concession rates.

10. Reduce the balance of payments deficit:

Fiscal policy seeks to encourage exports through financial measures such as income tax exemption on export income, central customs exemption, sales tax and octroi exemption. Forex is also protected by providing financial benefits to import substitutions, such as imposing tariffs on industries and imported goods.

Foreign exchange obtained from exports and saved by import substitution helps solve the balance of payments problem. In this way, balance of payments disadvantages can be corrected by imposing tariffs on imports or subsidizing exports.

Q3) Explain several direct and indirect means used to implement monetary policy.

A3)

There are several direct and indirect means used to implement monetary policy.

Cash Reserve Ratio (CRR): The share of net demand and time debt (deposits) that a bank must maintain as a cash balance with a reserve bank.

Legal Liquidity Ratio (SLR): The ratio of net demand and time liabilities (deposits) that banks must maintain on safe and liquid assets such as government bonds, cash and gold. SLR changes often affect the availability of banking system resources for lending to the private sector.

Refinancing Facility: Sector-specific refinancing facilities aim to realize sector-specific objectives by providing liquidity at a policy repo rate-linked cost. However, reserve banks have gradually subsided focused on sector-specific policies because they interfere with the mechanism.

Liquidity Adjustment Facility (LAF): Consists of overnight and term repo / reverse repo auctions. Gradually, Reserve Banks have increased the share of liquidity injected into the LAF through the Term Repo.

Term Repo: Since October 2013, the Federal Reserve Bank has introduced Term Repo (various periods, like 7/14/28) to inject liquidity over a extended period than overnight. the aim of the term repo is to support the event of the interbank market. this enables you to line market-based benchmarks for loan and deposit pricing, through which you'll improve monetary policy communication.

Marginal Permanent Facility (MSF): A facility that permits a planned full-service bank to borrow additional overnight money from a Federal Reserve Bank by dipping it into the SLR portfolio (currently 2 of net demand and time debt deposits). %) Penalty rate of interest (currently 100 basis points above the repo rate). This provides a security valve against unexpected liquidity shocks to the banking industry. MSF rates and reverse repo rates determine the corridor of day-to-day movements in market interest rates.

Open Market Operations (OMO): These include both full purchase / sale of state securities (for liquidity injection / absorption).

Bank Rate: the speed at which the Federal Reserve Bank is prepared to get or redistribute bills of exchange or other cash equivalent. This rate is adjusted to match the MSF rate, so if the MSF rate changes because the policy repo rate changes, it'll change automatically.

Market Stabilization Scheme (MSS): This financial control instrument was introduced in 2004. The more permanent nature of excess liquidity resulting from large capital inflows is absorbed by the sale of short-term government bonds and government bonds. The mobilized cash is stored during a government account break away the Federal Reserve Bank. Therefore, this device has both SLR and CRR capabilities.

Q4) State the Importance of industrialization.

A4)

Industrialization is the most important requirement for the country's rapid economic development. Industrialization not only helps the development of industry, but also promotes the social sector of agriculture, trade, transportation, foreign trade, services and economy. It improves employment opportunities, national income, per capita income, and the standard of living of the masses. Therefore, industrial policy is needed to establish a healthy tradition of industrialization and to guide, regulate and manage industrial development (if necessary). A country's industrial policy is influenced by the ideologies and principles of the governments involved. Industrial policy helps the country to prosper in a self-sufficient manner by laying the structure and foundation for industrial development. Therefore, the government's industrial policy. It must be clearly defined, clear and progressive. You also need to adhere to it and take it seriously.

Q5) Define industrial policy.

A5) Meaning of industrial policy:

Industrial policy refers to such a formal declaration by the government through the general policies of the industry adopted by the government. It will be published. Any industrial policy can initially consist of two main parts: the ideology of government. This is the governing rules and principles that determine the nature of industrialization and, secondly, provide a particular framework behind existing ideologies. In this way, industrial policy is a comprehensive concept that provides policy guidance and overview for the establishment and functioning of industry.

Q6) State the need, purpose and importance of industrial policy.

A6)

The necessity, purpose and importance of industrial policy can be explained in the following points.

Development of natural resources:

Industrial policy helps to fully develop the country's natural resources. Helps identify, collect, and use resources properly. It promotes an increase in the national income of the country.

2. To boost industrial production:

The main purpose of industrial policy is to increase the country's industrial production. It provides the impetus for the rapid development of the industry and the growth of the industry.

3. Modernization:

Industrial policy encourages modernization to increase industrial production and productivity. It envisions the use of modems and the latest production technology in the industrial sector. Promote maximum production with minimum production cost.

4. Balanced industrial development:

Industrial policy envisions a country's balanced industrial development. It also promotes balanced development in various sectors of the economy.

5. Balanced regional development

Industrial policy helps the country to develop a balanced region. Industrial policy may include provisions regarding the provision of facilities or concessions for the rapid development of an industrially backward region / region of a country.

6. Coordination between basic and consumer industries

Balanced development of basic and consumer industries is essential for economic growth. Industrial policy, on the one hand, encourages the development of basic and major industries, and on the other hand, attention is also paid to the development of the consumer industry. Therefore, with balanced and collaborative development of both types of industry, it provides a pace for economic growth.

7. Coordination between small and large industries

Industrial policy plays an important role in the coordinated development of small or domestic and large industries. These industries can help each other through the provisions of industrial policy.

8. Area determination

Industrial policy determines the areas of business under the public and private sectors. Through national industrial policy, we can set the right direction for the private sector.

9. Heartfelt labour-management relations

Comprehensive industrial policy is needed to build a heartfelt relationship between workers and managers. Heartfelt labour-management relations are essential for rapid and sustainable industrialization.

10. Appropriate use of foreign aid / investment

Appropriate industrial policy is supposed to attract foreign capital and entrepreneurs. It helps the country's rapid industrial development. If you think carefully about industrial policy, the disadvantages of "foreign assistance" will be confirmed. Foreign aid can be used for national interests if the country implements appropriate industrial policies.

Q7) What do you mean by Industrial license?

A7)

The industrial license complies with the Industrial Development and Regulatory Act of 1951. The 1956 Industrial Policy Resolution identified three industry categories:

Reserved for development in the public sector.

Development permitted by private companies with or without national participation. And

Investment initiatives usually originate from private entrepreneurs.

Over the years, policies have been revised in light of the changing industrial scene of the country. Industrial licensing policies and procedures are also liberalized from time to time. To fully realize the potential of the country's industry, this process of change must continue.

In order to achieve the strategic objectives of the industrial sector since the 1990s, some changes need to be made to the industrial approval system. Key policy initiatives and procedural reforms are needed to actively encourage and support Indian entrepreneurs to take advantage of and address new national and global opportunities and challenges. The basis of such a series of measures must be to allow entrepreneurs to make investment decisions based on their own commercial judgment. To achieve technological dynamism and international competitiveness, companies need to be able to respond quickly to the rapidly changing external conditions that characterize today's industry. Government policies and procedures must be coordinated to support the efforts of entrepreneurs. This can only be done if the role played by the government is changed from a role that only exercises control to a role that provides support and guidance by making the basic steps completely transparent and eliminating delays. I can do it.

The wind of change has been with us for some time. The industrial licensing system is gradually shifting from the concept of capacity licensing. The public sector business booking system is evolving towards a more flexible spirit, allowing private sector companies to gradually enter many of these areas on a case-by-case basis. We need to provide more input to these changes, which alone can push the country towards achieving entrepreneurial and industrial potential. This requires a bold and imaginative decision designed to remove the constraints of capacity building and at the same time not endanger the invalidation of national interests.

In the above context, industrial licenses will no longer be abolished for all industries except those specified, regardless of the level of investment. These particular industries are enforced for strategic reasons for safety and social reasons, issues related to safety and preferred environmental issues, the manufacture of products of dangerous nature and the manufacture of elite consumer products. Subject to license. License exemptions are especially useful for many dynamic small and medium-sized entrepreneurs who have been unnecessarily hampered by the licensing system. Overall, the Indian economy will benefit from becoming more competitive, more efficient and modern, and will occupy its legitimate position in the world of industrial progress.

Q8) Write short note on Industrial licensing policy.

A8)

Industrial licensing policy

i. Industrial licenses cover all projects except for a short list of industries related to security and strategic concerns, social reasons, toxic chemicals and top environmental reasons, and the Elite Consumption List items attached as Appendix II. Will be abolished in. Industries that are booked for the small sector will continue to be booked that way.

ii. Areas dominated by security and strategic concerns will continue to be reserved for the public sector (list attached as Appendix 1).

iii. For projects that require imported capital goods, automatic clearance will be given-

A. If foreign exchange availability is secured through foreign capital-or

B. c.i.f. The required value of imported capital goods is less than 25% of the total value of plants and equipment (after tax), with a maximum value of 2 rupees.

Given the current difficult foreign exchange situation, this scheme [i.e. (iii) (b) will come into effect in April 1992. In other cases, importing capital goods requires a permit from the Industrial Support Office (SIA).

Industrial Development Bureau according to the availability of foreign exchange resources.

i. Outside of cities with a population of 1 million or more, there is no need to obtain industrial approval from the central government, except for industries subject to compulsory licenses. For cities with a population of over 1 million, non-polluting industries such as electronics, computer software and printing are located 25km outside. In the surrounding area, except for the previously designated industrial area. Flexible location policies will be adopted for such cities that require industrial revitalization (population over 1 million). Land use regulation and environmental law zoning will continue to regulate industrial areas. Appropriate incentives and investment design for infrastructure development are used to promote industrial decentralization, especially in rural and rear regions, and to reduce urban congestion.

ii. A system of controlled manufacturing programs that runs on a case-by-case basis does not apply to new projects. Existing projects with such programs will continue to be managed by them.

iii. Existing units will be provided with new broadband features that will allow you to create articles at no additional investment.

iv. The license exemption applies to all significant expansions of existing units.

v. The mandatory conversion clause no longer applies to term loans from financial institutions for new projects.

Procedural results

vi. All existing registration schemes (DE license registration, exempt industry registration DGTD registration) will be abolished

vii. From now on, entrepreneurs only need to submit a memorandum of information about new projects and major expansions.

viii. The list of Annex n and Annex m is communicated in the Indian Trade Classification (Harmony System).

Q9) What kind of Industries are subject to compulsory licenses in India?

A9)

Companies planning to establish an industry in India that produces any of the following items must obtain a compulsory license.

Distillation and brewing of alcoholic beverages.

Cigars and tobacco and manufactured tobacco substitutes.

Electronics, aerospace and defense equipment.

Industrial explosives such as explosive fuses, safety fuses, explosives, nitrocellulose, matches. And

Hazardous chemicals, including items that are harmful to human safety and health. Therefore, it is subject to compulsory license.

These industries are licensed primarily for environmental, safety, and strategic considerations. Compulsory implementation is regulated by the Ministry of Industrial Development.

Q10) Explain the Recent Developments in the Indian Economy.

A10)

The recent developments in the Indian Economy can be studies under:

(a) Liberalization, (b) Privatization, and (c) Globalization.

(A) Liberalization:

Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of a company. Included:

(I) Abolition of industrial license requirements in most industries.

(II) Freedom to determine the scale of business activities.

(III) Freedom of price fixing of goods and services.

(Iv) Simplify import / export procedures.

(V) Tax rate reduction. And

(VI) Simplified policy to attract foreign capital and technology to India.

Through this liberalization process, the Indian economy was opened and began to interact extensively with the world. This has made it easier for foreign companies to enter India. This has resulted in even more fierce competition and efficiency. Ultimately, liberalization includes high growth rates, easy availability of goods at competitive prices, healthy and prosperous stock markets, high foreign exchange reserves, low inflation rates, strong rupees, good labour relations, etc. Helped to achieve.

(B) Privatization:

Privatization refers to reducing the role of the public sector by involving the private sector in most activities. The policy reforms announced in 1991 literally stopped the expansion of the public sector, and the private sector recorded rapid growth during the post-liberalization period. The issues of privatization are:

(I) Reduce the number of industries reserved for the public sector from 17 to 8 (later reduced to 3) and introduce selective competition in the reserved areas.

(II) Stop investing in shares of selected public sector industrial enterprises to procure resources and encourage broader participation of the general public and workers in ownership of businesses.

(III) Improving business performance through the Ammo system, which gives management greater autonomy while taking responsibility for specific outcomes. In India, as a result of these steps, India's private sector business has expanded significantly in the post-liberalization phase. You can see the expansion as the total capital of the top 500 private companies has risen from RS. Rs from 1,39,806 rupees in 1992-93. 2,34,751 chlores in 1994-95 (68% increase in just two years).

In other words, it is a reduction in ownership of the owners of state-owned enterprises. Government-affiliated companies can be converted to private companies in two ways:

Due to investment withdrawal

By withdrawal of government ownership and management of public sector companies.

Form of privatization

Non-state or strategic sale: When 100% government ownership of a productive asset is transferred to a player in the private sector, the act is called non-state.

Partial Privatization or Partial Sale: If the private sector owns more than 50% and less than 100% of the public sector company previously interpreted by the transfer of shares, it is called partial privatization. Here, the private sector owns a majority stake. As a result, the private sector effectively controls the functioning and autonomy of the company.

Deficit privatization or token privatization: When the government stops investing in equity capital in the range of 5-10% to cover the budget deficit, it is called deficit privatization.

Purpose of privatization

Improve the financial situation of the government.

Reduces the workload of public sector enterprises.

Raise funds from the discontinuation of investment.

Increase the efficiency of government agencies.

Providing consumers with better and improved products and services.

Create healthy competition in society.

Encourage foreign direct investment (FDI) in India.

Globalization means "integrating" a country's economy with the world economy. This means a free flow of goods and services, capital, technology and labour across borders. To achieve these globalization objectives, the government has adopted a variety of measures, including reducing tariffs, eliminating quantitative restrictions or quotas on imports and exports, promoting foreign investment, and encouraging foreign technology. These measures are expected to achieve higher growth rates, increased employment potential, and reduced regional inequality.

Outsourcing as a result of globalization

The most important outcome of the globalization process is outsourcing. In the outsourcing model, a company in one country hires an expert from another country to do the job. This was previously done by domestic internal resources.

The best part of outsourcing is the ability to work at lower rates from great sources available from anywhere in the world. Services such as legal advice, marketing and technical support. As information technology has grown over the past few years, outsourcing of contract operations from one country to another has increased significantly. All economic activity has expanded globally as the means of communication have expanded its reach.

Various business process outsourcing companies or call centres have been developed in India that have voice-based business process models. Activities such as accounting and bookkeeping services, clinical advice, banking services and even education are outsourced from developed countries to India.

The most important advantage of outsourcing is that even large multinationals and SMEs have access to superior services at lower rates compared to their own standards. Skills set in India are considered to be the most dynamic and effective in the world. Indian professionals are the best in their work. Low wages and highly skilled professionals make India the most lucrative destination for global outsourcing in the later stages of reform.

Q11) Discuss the purpose of latest EXIM Policy (Export- import policy).

A11)

The government imports non-essential items EXIM policy. At the same time, we are doing our best to promote exports. Therefore, the Exim policy has two aspects. Import policies related to import regulation and control, and export policies related not only to export promotion but also to regulation. The main purpose of the government's EXIM policy is to maximize exports. Exports need to be promoted so that unregulated exportable items that are specifically needed in the country do not affect the domestic economy. Therefore, export control is exercised on a limited number of items that require supply positions to regulate exports for the greater benefit of the country. In other words, the main purpose of the Exim policy is:

1. Accelerate the economy from low-level economic activity to high-level economic activity by making the economy a vibrant, global-oriented economy, and derive maximum profit from the expansion of global market opportunities.

2. Stimulate sustainable economic growth by providing access to essential raw materials, intermediates, parts, consumables and capital goods needed to boost production.

3. Increase the strength and efficiency of Indian agriculture, industry and services techno-local, thereby increasing competitiveness.

4. Create new jobs.

5. Give opportunities and encourage the achievement of internationally recognized quality standards.

6. Providing high quality consumer products at reasonable prices.

Q12) Where is FDI made? Explain its route.

A12)

Foreign direct investment is usually made in an open economy with a skilled workforce and growth prospects. FDI not only brings money, but also skills, technology and knowledge.

Indian FDI

FDI is an important source of funding for India's economic development. Economic liberalization began in India in the wake of the 1991 crisis, and FDI has been steadily increasing since then. India is today part of the Top 100 Business Ease (EoDB) clubs and is ranked number one in the world in the Greenfield FDI rankings.

Route for India to get FDI

Auto Route: Non-residents or Indian companies do not require prior nodding of RBI or Indian Government for FDI.

Government Route: Government approval is mandatory. The company must submit the application via a foreign investment promotion portal that facilitates single window clearance. The application is then forwarded to each ministry and approved / rejected in consultation with the Department of Commerce's Department of Industrial Trade Promotion (DPIIT). DPIIT issues standard operating procedures (SOPs) for processing applications based on existing FDI policies.

Q13) Write short notes on EXIM.

A13)

India's EXIM policy includes various policy-related decisions made by the government in the area of foreign trade. That is, exports and imports from the country, especially related export promotion measures, policies and procedures. Trade policies are prepared and announced by the central government (Ministry of Commerce). India's import and export policy, also commonly known as foreign trade policy, aims to develop export potential, improve export performance, encourage foreign trade and improve the balance of payments.

History of India's EXIM policy:

In 1962, the Government of India appointed a special Exim Policy Committee to review the Government's previous import and export policies. The committee was later approved by the Government of India. V.P. Singh, then Minister of Commerce, announced the Exim policy on April 12, 1985. Initially, the EXIM policy was introduced for three years with the main purpose of boosting India's export business.

Q14) Which sectors fall into the "Up to 100% Government Routes" category?

A14)

The sectors that fall into the "Up to 100% Government Routes" category are:

Banking and public sector: 20%

Broadcast content service: 49%

Core investment company: 100%

Food retail: 100%

Mining and mineral separation of titanium-containing minerals and ores: 100%

Multi-brand retail: 51%

Print media (publications / printing of science and technology magazines / specialized magazines / periodicals and facsimile versions of foreign newspapers): 100%

Print media (newspapers, periodicals, Indian editions of foreign magazines dealing with news and current affairs): 26%

Satellite (establishment and operation): 100%

Q15) State the Importance of FDI.

A15)

Foreign direct investment is important for developing and emerging market countries. Their company needs multinational funding and expertise to expand its international sales. Their countries need private investment in infrastructure, energy and water to increase employment and wages. A UN report warned that climate change would have the greatest impact on them. 26

In 2017, developing countries received $ 67.1 billion, or 47% of the world's total FDI. Investment increased by 9% in the developing world of Asia to receive $ 476 billion7.

Developed countries such as the European Union and the United States also need FDI. Their company does it for a variety of reasons. Most of the investment in these countries comes from mergers and acquisitions between mature companies. The investments of these global companies were to restructure or refocus their core businesses.

Q16) Mention the Advantages and disadvantages of FDI.

A16)

Advantages

Foreign direct investment benefits not only investors and beneficiaries, but also the global economy. Capital goes to growing companies anywhere in the world. Investors seek the highest returns while minimizing risk. The motive for this profit is colour blindness and does not care about religion or politics. 9

This gives well-managed companies a competitive advantage, regardless of race, colour or belief. Reduce the effects of politics, chronism and bribery. As a result, the smartest money rewards the best businesses in the world. Their goods and services are on the market faster than they would be without unlimited FDI.

As FDI diversifies its holdings outside a particular country, industry or political system, individual investors may improve portfolio efficiency (return per unit of risk). In general, a broader investment base reduces volatility across the portfolio and provides stronger long-term returns10.

The recipient company receives "best practice" management, accounting, or legal guidance from investors. You can incorporate the latest technology, operational practices and financing tools. By adopting these practices, we will improve the lifestyle of our employees. This will improve the standard of living of more people in the recipient country. FDI rewards the best companies in any country. It reduces the influence of local governments on them.

Beneficiary countries are seeing an improvement in living standards. The recipient will benefit from the investment and will be able to pay higher taxes. Unfortunately, some countries offset this benefit by offering tax incentives to attract FDI2.

Another advantage of FDI is that it offsets the volatility caused by "hot money". It is then that short-term lenders and currency traders create an asset bubble. They invest a lot of money at once and then sell their investment as fast.

It can create a booming cycle that ruins the economy and ends the political system. Foreign direct investment takes time to establish and leaves a more lasting footprint in the country.

Disadvantages

The IMF reports that it can reduce a country's comparative advantage.

Second, foreign investors may deprive businesses of their value without adding anything.

They were able to sell the unprofitable part of the company to local, less sophisticated investors.

They can use the company's mortgage to borrow a low-cost local loan. Instead of reinvesting it, they lend money back to the parent company

Q17) Which four agencies track FDI statistics?

A17)

Four agencies that are tracking FDI statistics are:

The United Nations Conference on Trade and Development publishes a Global Investment Trend Monitor. This is a summary of FDI trends around the world. 14

The Organization for Economic Co-operation and Development publishes quarterly FDI statistics for member countries. Report on both inflows and outflows. The only stats not obtained are those between the emerging markets themselves15.

The IMF published its first global survey of foreign direct investment positions in 2010. This annual global survey is available as an online database. It covers investment positions in 72 countries. The IMF was supported by the European Central Bank, Eurostat, the Organization for Economic Co-operation and Development, and the United Nations Conference on Trade and Development16.

The Bureau of Economic Analysis reports on the FDI activities of foreign-affiliated companies in the United States. It provides financial and operational data for these affiliates. Shows which US companies were acquired or created by foreign companies. It also describes how much US companies have invested abroad17.

Conclusion

Foreign direct investment occurs when a company or individual invests and owns at least 10% of the foreign company. 2 When an American tech company opens a data centre in India, FDI takes place. BEA tracks US FDI.

Many developing countries need FDI to promote economic growth and restoration. FDI has benefited the country through:

Improving living standards in emerging markets.

Competitive global capital allocation.

Decline in market volatility caused by asset bubbles 12

However, FDI can be disadvantageous in the following cases:

Foreign investment in strategic industries reduces comparative advantage.

It deprives or does not add value to the business.

In an increasingly globalized economy, opportunities for foreign direct investment are expanding. While investing abroad can be very economically rewarding, keep in mind that such investments carry significant risks.

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