Foreign Direct Investment

sunandaC

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Introduction: In any country, investment from individuals and institutions from other countries forms an important part of International Finance. Such investment can be carried out in two ways – by portfolio investment (acquisition of securities) or by direct investment (creation of productive facilities).

Foreign Direct Investment of FDI is a result of the mutual interests of multinational firms and host countries. It is defined as a long term international capital movement made for the purpose of productive activity, accompanied by the intention of managerial control or participation in the management of the foreign firm. Eg:- Tata-JLR Deal

According to the International Monetary Fund FDI is defined as the investment that that is made to acquire a lasting interest in an economy other than that of an investor. The investor’s purpose being to have an effective voice in the management of the enterprise. The main objective of Foreign Direct Investment is the transfer of package of capital, managerial skill and technical knowledge.

Of late, developments in the global markets indicate the fast growing of international business in terms of both market-size and geographical diversification. The wave of liberalisation has opened up many national markets including that of India. With the opening of India’s markets over the last decade and a half, its large potential market and the exponential growth of the Indian media , it is only natural that Indian media would also attract FDI from all corners of the world.

Therefore in June 2002, the Government of India permitted the FDI to the extent of 26% with respect to news and current affairs-based print media where an Indian shareholder holdsa greater share, and 74% with respect to non-news and current affairs based publications. Moreover 3/4th of the BoD and staff would have to be Indian. Key posts like that of the editor would also have to belong to Indians.

The government clearance came in the face of stiff opposition of several eminent editors that such investment would throw the Indian press open to foreign intervention in several sensitive areas. For e.g.:- Alex Perry’s Time Magazine article criticizing then PM Vajpayee, which was considered an insult to the country by many respected editors

Many other editors felt that FDI in the media was only allowed since India was buckling under pressure from other countries and that the government had not thought this through. Some felt that there is connection between globalisation and allowing FDI, like in the case of Singapore where the market is open for investment but not the media. According to P.K. Ravindran a respected journalist 34 major newspapers which account for 76.3% of the circulation were opposed to FDI.
People who argue for FDI in the media believe that it will bring about a change in the system as far as Indian publications are concerned. There would also be a welcome a flow of new technology, that indeed every media house would undoubtedly benefit from.

Many believe that it could bring in more professionalism into the industry. For e.g.:- The print media often flouts certain journalistic principles without any regard for privacy. The identity of a victim of rape cannot be given out, neither can any details of her family, residence etc. The Indian media hides the identity but shows glimpses of the victims house, so they get identified anyway. Such malpractices could change with some amount of managerial control from foreign media.

Global expertise in production, marketing, space-selling and display would be welcome too. Also liberalisation gives way to competition that raises the standards of the industry like we have seen in the telecom sector. Furthermore, publications would indeed benefit if FDI allows them to dip into foreign news banks. Eg:- CNN-IBN partnership and Times Now-Reuters partnership.
 
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