Budget 2020: What is Foreign Direct Investment?

Budget 2020: What is Foreign Direct Investment?

Representative image.

The Budget 2020 will be presented on February 1 by Finance Minister Nirmala Sitharaman. This will be the second budget for Prime Minister Narendra Modi-led NDA government after coming back to power for the second consecutive term by gaining landslide victory in the Lok Sabha Elections 2019. Ahead of the Budget presentation, let us take a look at what is Foreign Direct Investment. 

What is Foreign Direct Investment?

Foreign Direct Investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.

The origin of the investment does not impact the definition, as an FDI: The investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding the operations of an existing business in that country.