Nature of International Investment

Jun 18th, 2015
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Foreign capital mostly from the developed countries, have been playing an important role in the development of economies of the developing countries including INDIA. Foreign capital has entered in various forms.

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Nature of International Investment:Foreign capital mostly from the developed countries, have been playing an important role inthe development of economies of the developing countries including INDIA. Foreign capitalhas entered in various forms. Foreign capital has been used for long-term and short termneeds. Major forms of foreign capital are as under:Foreign aidCommercial borrowingsEquity investmentBroadly foreign capital has taken 2 formsa) Loan capital or debtb) Equity or share capitalForeign aid: Foreign aid or external assistance is major part of the loan capital which hasbeen made available to the country at soft or confessional terms viz, rate of interest beingbelow the market rate or long period of repayment. Foreign aid has been given by foreigngovernments and Institutions like International development association an affiliate of theWorld Bank. The recipient in the country is mostly the government, but in some casesprivate companies also get it. A part of the foreign aid is in the form of grant or gift whichinvolves no repayment obligations either by way of payment of interest or return of thecapital.Commercial Borrowings: Besides loans and grants as foreign aid, foreign capital is alsosought through commercial borrowings or loans from the International market. Acommercial borrowing are subject to market related rate of Interest and is higher than onloan as foreign aid. Loans may be raised by issue of bonds in the Internatio

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