Question

Explain any five advantages of FDI.

Answer 1

1. Achieving Higher Growth in National Income Developing countries get much-needed capital through FDI to achieve a higher rate of growth in national income.

2. Help in Addressing BOP Crisis FDI provides an inflow of foreign exchange resources into a country. This helps the country to solve the adverse balance of payment position.

3. Faster Economic Development FDI brings technology, management, and marketing skills along with it. These are crucial for achieving faster economic development in developing countries.

4. Generating Employment Opportunities FDI generates a lot of employment opportunities in developing countries, especially in high-skill areas.

5. Encouraging Competition in Host Countries Entry of FDI into developing countries promotes healthy competition therein. This leads to enterprises in developing countries operating efficiently and effectively in the market. Consumers get a variety of products of good quality at a market-determined price which usually benefits the customers.