Evaluate the advantages and disadvantages of FDI. Also explain the role of FDI in the economic development of the host country.
Answers
Advantages
Employment generation- Unemployment continues to plague the Indian youth and is one of the major issues facing India. FDI creates new jobs in the target country due to the setting up of new companies. In India, it is generally agreed that an increase in the manufacturing sector can generate new jobs because the government jobs are limited and cannot provide employment to the millions of educated youths of the country.
Quality of products and flow of technology- The quality of products manufactured by the company increase greatly due to the increased competition in the market. Modern technologies brought by the foreign companies into India will give the much needed boost to the Indian industries and make them more competitive in the world. Consumers would also be greatly benefited due to the decreased prices of the products manufactured in their own country. It has been estimated that consumer savings would increase by 5-10% due to FDI.
Improvement of agricultural sector- The Indian farmers are in a pitiable state. Every year thousands of farmers are committing suicide all over the country due to the lesser returns generated by their agricultural produce. FDI will bring about a significant change in the lives of the farmers as they would earn 10-30% more income for their products.
Increase in government revenue- The revenue earned by the government is estimated to be increased by about 25-30 million dollars. This increased revenue would be highly beneficial for the development of India. The Indian economy would receive a huge boost and would greatly contribute to the country’s quest to become an economic powerhouse.