Why do people invest? What are the factors which are favorable for making investment in an economy? ( 2015 )
Ans:- Meaning of investment- Investment refers to an asset or wealth acquired with the intent of generating income and appreciation in it. When assets are purchased with the intention of increasing value in money over the period of time. So it is kept for a long period for generating more value of such assets.
Definition of Investment:- Investment involves acquiring any assets with the intent of making profit or gain in the future. Investment refers to future security which grows with time and gives security for future financial requirements.
In other words:- The process of putting money into a business to purchase goods, stocks, jewelry, real estate and land with the purpose of increasing wealth is called investment. It is used for gain or profit in the long run.
Why people do invest?
Everybody would like to increase their wealth. Which means money earns money. This is the main reason due to which they would like to invest.
As we know that no one would like to keep his money in his home. Because no return will be on such money which is in home. So if they invest in any form like stock market, real estate, jewelry and on business all these will provide return to the owner. So they would like to invest to increase their wealth.
Favorable Factor for Investment in an Economy
The following factors for investment are favorable in the economy.
- Agriculture:- Majority of the population of India is engaged in agriculture and in its allied activities. So agriculture contributes considerably to the growth of India. What goes to the GDP of India.
Some businesses use raw material as inputs, while other businesses supply raw material of crops to allied industries. Thus, agriculture plays an important role in any economy. So if any economy is concerned with agriculture business then investors can invest in such industries. Which will be a favorable factor for an investment. Investment in indian economy
- Political Stability:- Development of any economy depends upon the stability of political system. Stable political system can boost the industries development. Such system can understand proper needs of industry and provide them essential condition to survive in the Long run. Thus, such an industry can meet the needs of any economy. This investment opportunity will be aroused morein economy.
Otherwise not, obstacles will be arised in the economy for its development in the unstable political system of any country. Investment in indian economy
- Research and Technology:- Research and technology also play an important role in the economy. Because Development of any economy depends upon research and technology. Government also invests in research and technology for the purpose of advancement in the operations of work.
However, any investors can invest in those research and technology industries in which the government has been invested. If there is more advanced research and techniques are available in the economy it will be profitable for the investors.
- Infrastructure facilities:Infrastructure facilities like Road, Godown and Ports etc plays an important role in the business. So such business contributes to the GDP of an economy. A good infrastructure is helpful to the economy which enables it to boost the development of an economy.
Adequate infrastructure facilities leads to increased productivity and inefficiency infrastructure facilities leads to lower productivity. Investment in indian economy
Thus investors can analyze the infrastructure facilities in the economy before investing their money on any project. They can also consider the commitment of the government towards infrastructure.Investment in indian economy
- Rates of Interests:- Interest rates play an important role in the economy. Interest rates determine availability of credit to the companies as well as cost for the project. Lower interest rates leads to lower cost of credit to the business organization. In result of which profit will be increased in the business.
On the other side, higher interest rates will lead to higher cost of finance to the business. As a result , production costs will be increased. Ultimately demand for the products will decline. Due to which profit will decline also. So on the way of investment investors can consider rates of interest. Which influences the economy. Investment in indian economy
- Natural resources:- Every country contains different types of natural resources. Example– Iron, Copper, wood, cole, oil, water and soil. Which are used as raw material for making final goods for the purpose of meeting the needs of potential buyers.
Abundance of these natural resources leads to a rich country. Investors can decide about investment in these countries. Because operations of work will be done without obstacles. Such a type of work which depends upon these natural resources will boost investment. The availability of Natural resources leads to developing different types of business for keen investors. Investment in indian economy
- Education System:- Education system plays a very important role in every country. Education system provides intelligence into the minds of people. As it is able to make people better in their work, in which they are engaged.
Education system can provide many alternatives to human beings for their development. Out of which they can choose the best ways which are more profitable in their life. So investors can also analyze the education system of every country before investing into any project.
- Saving and Investment:- This factor also plays an important role in the economy. As if saving occurs then people can invest their spare money. If the saving level is increased into any economy then corresponding investment will also be increased in that economy. Otherwise it will be reversed.
So investors can analyze the saving system of any country before investing which can influence their investment. Investment in indian economy
- GDP :- Gross Domestic Product of any country tells about its development. As we know all goods produced in the final form are consumed by consumers. It is the aggregate value of all final goods and services within one financial year. So GDP describes the performance of the overall development of the economy.
Investors can analyze the level of GDP before investing in the economy. The higher the level of GDP, the higher the level of investment. So GDP cannot be avoided in the way of investment. Investment in indian economy
Conclusion:- After studying the above explanation we can conclude that these factors are favorable for investors who would like to invest into the economy. We can also feel the emotion of investors why they invest in the economy. We don’t neglect any points which are discussed above. Investment in indian economy
If you tired on the way of study you can refresh your mind by reading love poetry as per your interest. Investment in indian economy