FDI Foreign Direct Investment is a module of country's national financial accounts. In Foreign direct investment, the investment is made by foreign assets into domestic structures, equipment, and organizations. FDI is believed to be more useful to a country than investments in the equity of its companies because equity investments are potentially "high risk". Whereas, FDI is durable and generally useful when things go well or badly. FDI means investment by Non-resident person or organization Resident outside India in the Capital of an Indian company as per Foreign Exchange Management Act. Significance of FDI \tFinancial Transfer in Foreign Exchange \tProduction Technology \tManagement Skills \tPhysical Resources like Machinery Tools Equipment etc. \tInstitutional System \tInformation & Database \tWorldwide Contacts \tResearch & Development \tTraining Resources \tTrade Channels Factors affecting FDI to Come in India \tStable democratic environment over 60 years of independence \tLarge size of the economy, particularly the large and growing middle class \tOpen door policy towards FDI \tAbundance of natural resources \tDiversified industrial sectors \tLarge and growing market \tCost-effective and skilled labor, World class scientific, technical and managerial manpower \tCheap and abundant availability of technical manpower at various level of skills \tEmerging trends towards deregulation/ privatization and globalization \tLarge network of banking institutions \tDeclining structure of interest rates in-tune with global trends \tLarge base of existing MNC‟ in number of industrial segment Types of Foreign Investments Basically, there are three types of Foreign Investments in India. They are as follows: \tForeign Direct Investment (FDI) \tForeign Portfolio Investment (FPI) \tForeign Institutional Investment (FII) Foreign Direct Investment (FDI) Foreign Direct Investment means an investment made directly by a person or organization in the business operation of another foreign country. In other ways, we can say that Foreign Direct Investment is an action of transferring capital overseas for the purpose of establishing a name for a company in the foreign country. Foreign Portfolio Investment (FPI) When any foreign organization or non-residents invest in Indian securities including shares, Debentures, Government bonds, corporate bonds, Infrastructure securities, convertible securities etc. it is Foreign Portfolio Investment. Such investors make sure that the capital invested can have controlling interest. While investing such capital they ensure that the scheme is flexible for entry and exit. Foreign Institutional Investment (FII) Foreign Institutional Investor means an entity established or incorporated outside India which proposes to make an investment in India and which is registered as an FII in accordance with the SEBI (FII) Regulations 1995. Foreign Institutional investment can make an investment in funds like hedge funds, insurance companies, pension funds and mutual funds. Advantages of FII \tEnhanced flows of equity capital \tFIIs have a greater appetite for equity than debt in their asset structure. It improves capital structures. \tManaging uncertainty and controlling risks. \tFII inflows help in financial innovation and development of hedging instruments. \tProfessional bodies enhance competition and efficiency of financial markets. \tImproved corporate governance Relaxation in Policies The government has hassle-free existing laws and made changes in some new laws to promote better opportunities for foreign investment in India. A five-year tax holiday has been extended to enterprises that are working in the development of infrastructural facilities. The Foreign companies which do not have registered office in India even can start multimodal transport services. RBI authorizes 100% foreign investment in the construction of roads and bridges.