All about FDI

India has become the favorite destination for foreign investors. Over 1.2 billion people and 40% middle class, India’s retail sector is a hunting ground for biggies in western world.
       FDI, Foreign Direct Investment is a “direct investment into production” or “business in a country by some other country”. It can be a modified business to an existing one or a completely developed technical infrastructure.

In simple words:

An “x” company visits India and opens its own store for capturing local markets or a “y” company takes over an Indian company to boost productivity.

It is called “home-host business”. The home country earns millions of dollars by expanding its business though overseas while the host country acquires the technical and managerial skills from it. In engineering language it is called “technology transfer; where technology and skill is transferred from one country to another.
          The historical background of FDI in India can be traced back with establishment of East India Company. It was under the guidance of Gandhiji who started boycotting foreign clothes by introducing swadeshi movement.
Soon after independence we saw a lot of changes in Indian market. Foreign players like PepsiCo, kfc, Honda could not widen up their business due to stringent laws and regulations. These laws were meant to keep a balance between domestic market and multi brand retail.

           Development is a very time taking phenomena. No matter how organized the union Budget is, it is very impossible to build a world class infrastructure in a poverty stricken country. To remove inflation we require heavy flow of foreign money and technically sound infrastructure.

           However Indian government has allowed 51% FDI in retail sector. So giants like Wal-Mart will be selling quality products at cheaper rate.



I have gathered some pros and cons of FDI:

Pros

• With best technologies, excellent packaging and superior manufacturing units wastage of products is minimized.
• 
  
•  Due to non involvement of middle men, farmers will get the right price for their crops.
• 
  
•  Steep competition means frugal engineering; “Better quality at lower price”
• 
  
•  There will be transparency in cash flow. Right Taxes will add revenue to the government.
•  Because of “technology transfer” domestic production will get a new shape. Use of updated machinery and assembly line will boost  production.
•   Huge employment of technicians, engineers and skilled persons.

Cons

•  It will destroy the income of local retailers and middle men. Lakhs of people will become jobless.

•  Multi brand retain will introduce a variety of Chinese products which may ruin our domestic sales.

However if we see the present scenario, we need FDI as soon as possible. Poverty, unemployment, inflation and corruption have eaten up sectors like Telecom, Rail, oil and power. To build world class renewable system, fast internet, quality food and excellent transport system, we need money and technology. And unfortunately we don’t have both.
          Rail, defense and telecom have already shown  green signal towards FDI and it is our hope to see how the present government copes up with the modern environment.

IRAQ: - The battleground for oil

 

Iraq is the birthplace of writing and a cradle of ancient civilization. It is an oil rich country, sharing borderline with Iran, Syria and Saudi Arabia.

1991
 
There are three of Islamic groups in Iraq; the Kurd, Shias and Sunnis. In late 90s Iraq, under Saddam led Sunni government invaded Kuwait and formed the greatest ever gulf war. However US intervention shunned down the Iraq government taking control over exports and oil reserves.
Soon after 9/11 attack in World-Trade-Center, the Bush government declared that Saddam Hussein is connected with Al-Quida terrorists and his country was producing ‘weapon of mass destruction”(WMD- weapons that cause heavy threat to mankind)
 

2003

The war raged the entire world. Billions of dollars were pumped to remove Saddam Hussein and his extremists. Countless Iraqis died, raped and tortured.
The US intervention destroyed Iraq’s infrastructure, cleansed ethnic buildings and blocked electricity. Many US soldiers were wounded and died in the open clash.
After 5yrs of wear and tear, Saddam was finally captured and executed. The US failed to find any traces of WMD. The accusation turned out to be false and Bush led America was under extreme pressure.
This led to a cold war between Islamic nations and western countries.


2013-14

 
After the execution of Saddam, a Shunni led militant group was developed in middle east. Popularly known as ISIS (Islamic state in Iraq and Syria), responsible for recent conflicts, car bombing and mass attacks in Iraq. ISIS is trying to take control over central Iraq by threatening Baghdad and its rich oil fields. Thousands of brutal murders are taking place with open firing and kidnapping of women.
Neighboring countries like Iran (an anti US and Shia majority nation) is fighting against ISIS to gain control over central Iraq. This has further impacted several conflicts in Syria and its neighboring Shia-Sunni nations.

chit funds

A chit fund is a typical saving scheme practiced in India. It was originated in Europe and was popularly known as pyramid scheme. From time immemorial, money has always been borrowed from lenders in exchange of gold, land or valuable items.
Chit fund is basically know as’ chiity’ or ‘kuri’ in India and it is extensively practiced in states like Rajasthan, Kerala and Tamil Nadu.

HOW DOES ITS WORKS?

Suppose a person deposits 1000rs ($17), every month.
Similarly 50people like him deposits the same or more amount.
So net principal becomes=1000*12*50=6lakhs ($200)

This net amount is auctioned in various fields like constructions; share markets and underworld gambling. This interest feeds the company’s employees and its customers. The downfall occurs when there is a slowdown in economy or landslide in share market. In that case the chit fund company endures a huge loss impacting the root customers.

IS HOLDING A CHIT FUND COMPANY ILLEGAL?

Operating or holding a chit fund is legal. The concept is very unique with several merits. It provides jobs to many unemployed youths; secondly it boosts up micro finance, household development and promises a smile to many customers.

E.g.; a poor farmer keeps a part of his income in the chit fund company for a hope of getting a large interest to meet his daughter’s marriage in future.

WHY THEY ARE SO POPULAR?

Chit funds schemes are usually lucrative. They drag attention of customers and convince them to keep their money  in the company.
They are eye-catching because they provide huge interest (somewhat double the government banks) and are almost hassle free (no documentations or official work is required).

WHAT IS PONZI SCHEME?

Ponzi is a fraudulent investment operation that pays a very high rate of interest usually 10-15%. It was usually named after Charles Ponzi in 1920, who was notorious for fraud investments.

WHAT ARE ITS DEMERITS??

Although it is prescribed by ministry of finance, but the entire power lies in the hands of state government. As a result lots of unimportant laws is created.

WHY THE SYSTEM COLLAPSES?

• External market forces
• Weak economy
• Withdrawal of quick cash
• Declining economy
• Poor share markets
• Demanding agents