Question

Explain the role of foreign capital in economic development.

Answer 1

Answer:

The economic prosperity of a nation depends heavily on foreign direct investment (FDI). India has been able to develop its infrastructure, boost productivity, and create more jobs thanks to the inflow of foreign currency.

Explanation:

FDI can be used to acquire cutting-edge technologies and access foreign exchange reserves. Additionally, the country's foreign exchange reserves give the RBI (India's central banking organisation) the ability to intervene in the foreign exchange market and restrict any negative movement to maintain stable foreign exchange rates. As a result, it improves the economic environment for India's economic growth.

We must go back to the time before independence when the East India Company first arrived if we are to understand the history of FDI. Following independence, officials started to take issues involving foreign financing and MNC operations seriously.

The FDI strategy was created to keep national interests in mind, and it intends to use FDI to acquire sophisticated technology and mobilise foreign exchange resources. The FDI policy has changed over time and according to economic and political regimes.

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