Abstract
Foreign Direct Investment (FDI) is the process wherein residents of one country acquire ownership of assets of a firm in another country with regard to controlling the production, distribution and other activities. In other words, FDI is an investment made by a company or an individual in one country into business interests located in another country. Since the flow of FDI may be spreaded to different nations it frames the multi-national companies (MNC). FDI has three components viz. equity capital, reinvested earnings and intra company loans. Equity capital refers to the purchase of share of an enterprise in a country by the foreign direct investors. Reinvested earnings comprise the share of the direct investors out of their earnings not distributed as dividends by affiliates to them. Again intra company loans refer to short or long term lending and borrowing of funds between direct foreign investors and affiliate enterprises.