What do you understand by leech effect? What is its impact on society?

• When the surpluses generated by an enterprise are not reinvested in the area where business unit is located but are reinvested at the place of entrepreneur’s origin, then it is compared to the blood sucking process of leeches and is known as leech effect.

Leech effect causes draining of wealth from the place of its origin to entrepreneur’s place of origin. In this way profits earned are not reinvested in the same area for the welfare of those people who have generated them.