Greenfield and brownfield investment
Also called: Greenfield FDI, Brownfield FDI · Topic: Balance of Payments and Exchange Rates · NCERT: Beyond NCERT
Meaning
These are two forms of direct investment. Greenfield investment builds new facilities from scratch, such as a new factory on empty land. Brownfield investment buys or expands facilities that already exist. Greenfield adds new capacity and jobs, but it takes time. Brownfield is faster because the plant, workers and market are already in place, but it mainly changes who owns them.
Example
Cargill buying Parakh Foods is a brownfield investment in India: a foreign firm took over an existing Indian business. A foreign carmaker building a new plant on fresh land in India would be a greenfield investment.
Don't confuse with
- FDI vs FPI: both greenfield and brownfield are forms of direct investment with a lasting interest. Portfolio investment is buying shares or bonds without a controlling stake, below 10% of equity.
Related concepts
- Capital account
- BPM6
- Capital flows
- Foreign Direct Investment
- Foreign portfolio investment
- Automatic route and government route
- Overseas direct investment
- Round-tripping
- External commercial borrowings
- Non-resident deposits