The Reserve Bank of India has observed that Foreign Direct Investment (FDI) positively impacts the profitability of FDI-receiving companies.<br />''<br />''In the paper 'Impact of Foreign Direct Investment on Profitability – Evidence from the Indian Corporate Sector' published yesterday, RBI has presented this conclusion.<br />''<br />''The paper says, the size of the company is positively associated with profitability, suggesting that larger FDI-receiving companies are likely to have higher profitability.<br />''<br />''This is because, in larger companies, the management is often more focused on preserving or improving its reputation, which helps in attracting greater FDI.<br />''<br />''Hence, FDI plays a greater role in enhancing the profitability of larger companies as compared to smaller companies.<br />''<br />''The paper also says, older companies are likely to have lower profitability.<br />''<br />''<span style="color: #222222;">This is because FDI in younger companies provides the much-needed stable funding, and technological know-how which can make their operations more cost-effective, and thereby enhances profitability. </span><br />