02-11-2016, 02:43 PM
1463559065-forfirstPageonly.docx (Size: 141.28 KB / Downloads: 7)
Objectives:
• A critical, constructive analysis of the literature in a specific field through summary,
classification, analysis, comparison.
• A scientific text relying on previously published literature or data.
• A stand-alone publication.
function of a review article
• to organize literature
• to evaluate literature
• to identify patterns and trends in the literature
• to synthesize literature
• to identify research gaps and recommend new research areas
Introduction
Since introduction the FDI has been seen as the main investment that will transform India into main stream of global investment destination. India witnesses a immense surge of FDI inflows during the past two decades. During early 1990s India suffered from massive balance of payment and foreign exchange crisis, which led Indian Government to opt for liberalised economic policies in 1991. This literature review aims to examine the impact of FDI on the Indian economy, particularly after two decades of economic reforms, and analyses the challenges to position itself favourably in the global competition for FDI. The review includes the major policy implications, besides drawing attention on interpreting FDI in India. Recent data on FDI in results indicate higher human capital and financial assistance are essential ingredients to reap benefits from FDI for India.The stable macroeconomic fundamentals, increasing size of the economy and improving investment climate has attracted multinational corporations to invest in India. An important outcome of economic reform process aimed at opening up the economy and embody globalization in 1991 has led to massive increase in Foreign Direct Investments (FDI) inflows to the subcontinent. In fact, UNCTAD's (United nations Conference On Trade and Development) World Investment Report ranks India as the second most attractive spot amongst multinational corporations after China. The strong economic fundamentals driven by economic reforms for years has helped India to attract FDI from meager US $103 million in 1991 to US $ 51 billion in 2015. The data considered is pooling information and data from various sources. It includes economic survey of India, Reserve bank of India, census, and policy papers amongst many other important sources.
Foreign Direct and Indirect Investment
FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. The FDI can take any route or form to enter into any nation. The three principal forms of FDI in India are joint ventures, acquisition of assets in a country and Greenfield ventures.
According to the international monetary fund, FDI is defined as “Investment that is made to acquire lasting interest in an enterprise operating in an economy other than that of investor. The investor’s purpose is being to have an effective voice in the management of enterprise.”
Foreign indirect investment as portfolio investment,
Portfolio investment does not seek management control, but it motivated by profit. Portfolio investment occurs when individual investors invest, mostly through stockbrokers in stocks of foreign companies in foreign land in search of profit opportunities.
Foreign investment comes in host country in through various route and many forms. Rather than attracting as much FDI as possible host country governments would be well advised to focus their efforts in inviting the “right” kind of FDI. Among all various routes the two main routes are:
• Foreign Direct investment (FDI) and
• Foreign indirect investment (FIIs)
The Inflow of Foreign Investment Comes Through Various Routes.viz:
1. Equity (Government, RBI, NRI, Acquisition, shares, Equity capital of unincorporated bodies); Re-invested earning; other capital.
2. Portfolio investment (GDR/ADR, FIIs, OFF shore funds and others)
Determinates of FDI in Host Country
I. Host Country Determinants:
1. Policy framework for F.D.I.
2. Economic, political & social stability.
3. Rules regarding entry & operations.
4. Standards of treatment of foreign affiliates.
5. Policies on functioning & structure of markets (esp. competition & merger and acquisition Policies.
6. International agreements on FDI
7. Privatization Policy.
8. Trade policy (barriers-tariff & non-tariff) and coherence of FDI and trade policies
9. Tax Policy
II. Type of FDI /Principal Economic Determinants in Host Countries
1. A Market-seeking
2. Market size & per captaincies
3. Market growth
4. Access to regional and global markets
5. Country specific consumer preferences
6. Structure of markets
III. Economic Determinates
1. Resource/Asset- Seeking
2. Raw materials
3. Low-cost unskilled labor
4. Skilled labor
5. Technological, innovatory and other created
6. Assets (e.q. brand name as embodied in dividable, firms and clusters)
7. Infrastructure (Ports, roads, power & telecommunication
IV. Business Facilitation
1. Investment promotion
2. Investment incentives (including image building & investment generating activities and investment facilitation services)
3. Hassle costs (corruption, administrative efficiency & the like)
4. Social amenities (bilingual schools, quality of life etc.)
5. After-investment services
V. Efficiency Seeking
1. Cost of resources and assets adjusted for productivity for labour resources.
2. Other input costs like easy transport & communication economy and cost of other intermediate products
3. Membership of a regional integration agreement conducive to the establishment of regional corporate networks
Need of Foreign Investment in India
India is suffering from the scarcity of financial resources and low level of capital formation because it has to majorly depend upon the external sources of Finance..Also the domestic resources are entirely inadequate to carry out development programmes.
Inflow of Foreign Investment in India
In India foreign capital comes from private individual and institutional investors on commercial terms in the form of Euro-issues comprising, external commercial borrowings, portfolio investments by non-resident of India’s, overseas corporate bodies and investments by foreign financial institutions. Foreign exchange reserves have played a pivotal role in India to supplement the low level of foreign investment. The flows of foreign exchange reserves comes in India in form of SDR(Special drawing Rate) and Gold, foreign currency assets and reserve tranche position. Foreign investments have played a pivotal role in India to supplement the low level of domestic investment. The flows of foreign investments in India takes the form of direct investment and portfolio investment which are non-debt creating flows in nature. The FDI flows in India took a new turn with announcement of New Economic Policy in 1991. The FDI allowed in priority sectors for the development of industries.
Foreign direct investment in India: FDI and Economic Growth
The Government of India’s largest component of capital flows was bank-lending in the ‘80s.After the inception of FDI in ‘90s the capital flows includes bonds, portfolio investments, FDI and private sector did most of external borrowing. Starting from a baseline of meager US $103 million in 1991 to US $ 34 billion in 2014, as per UNCTAD survey and 51 billions as DIPP report from January to December 2015. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI to the country.
India is suffering from the scarcity of financial resources and low level of capital formation because it has to majorly depend upon the external sources of Finance. Also the domestic resources are entirely inadequate to carry out development programmes. In India foreign capital comes from private individual and institutional investors on commercial terms in the form of Euro-issues comprising, external commercial borrowings, portfolio investments by non-resident of India’s, overseas corporate bodies and investments by foreign financial institutions
The government relaxed FDI norms in several sectors, including telecom, defense, PSU oil refineries, power exchanges and stock exchanges, among others.
Review of Literature:
Rajashekar “An Effective Study on Foreign Direct Investment in India” IJRCM Volume No. 5 (2015), Issue No. 09 given the idea of the economic power of the multinationals can be had from the fact that “Today, with the solitary exception of India whose national income is only twice the annual income of General Motors, economic resources of all other under developed countries are much less than those of multinational corporation.” Foreign collaborations do have a positive role in certain fields like power generation, steel, aluminium, petroleum, cement etc., but they should not be allowed to proliferate in consumer goods, needed by the upper strata of Indian society. The activities of multinationals which increase our dependence on foreigners and drain away our resources should be restricted. But a much bolder and persistent policy has to be followed to get rid of them.
Gupta & Garg, Apeejay Journal of Management Sciences and Technology 2 (3), June – 2015 “Foreign Direct Investment and Economic Growth in India: An Econometric Approach” states the results of lagged regression models, it becomes clear that FDI is positively and significantly related to GDP, when the time lag ranges between 1 to 6 years. But the relationship between FDI and GDP is found to be highly significant when time lag is of three years as all statistical values are in its favor. At this point, an increase in FDI by rupees one billion brings a rise of rupees 34.9 billion in GDP. Consequently, it can be concluded that FDI leads to the economic growth of Indian economy. However, it requires a time period of three years to make its contribution to the economic growth in a significant and utmost favorable manner.
Kuldeep Kumar, Foreign Direct Investment In Insurance Sector: Trends And Opportunities In India International Journal Of Research In Commerce, Economics & Management Volume No. 5 (2015) Issue No. 6 The study concludes that, FDI is as an engine of capital, technology, managerial skills, technological progress & capacity, access to foreign markets and in maintaining economic growth and development for developing countries, where as for developed countries it is considered as a tool for accessing the market of emerging economies. The study clearly observed from the data that foreign investors showed keen interest in different sectors because of liberalised regime pursued, launch of make in India scheme and ensuring ease of doing business and growth of Indian economy. FDI has helped the Indian economy grow and the government continues to encourage more investments of this sort. Attracting foreign direct investment has become an integral part of the economic development strategies for India. Foreign direct investment has been a booming factor that has bolstered the economic life of India. Over the years FDI flow is increasing. The study further observed that India has tremendous potential for absorbing greater flow of FDI in the coming years. Finally, the study also pointed out that, when discussing Foreign Direct Investment it is important to keep in mind that we are talking of investment. Hence, unless FDI has a net contribution of its own there is no reason why it should be distinguished from the general level of investment in the economy.
Kanika Chawla & Neha Rohra, Determinants of FDI: A Literature Review, The International Journal Of Business & Management Vol 3 Issue 3 March, 2015 Their
Main findings includes the Vast amount of literature is there on determinants of FDI but they have not produced consensual results. In fact, in a large number of studies we do not find any statistically significant relation for some determinants for e.g., in case of wage cost which have an inverse relationship with FDI in case of developed nations but the same holds a mix view in case of developing nations. There is no broadly recognized set of explanatory variables that can be considered as the “true” determinants of FDI. Most of the determinants of FDI for developing and developed nations are almost same and have same effect on FDI inflow such as GDP, economic growth, per capita income, openness, and infrastructure. They positively affect FDI- a result consistent with the market-seeking behaviour of multinational corporations (MNCs). Developed nations have focused more on macro stability factors such as level and method of privatisation in the host country, country risk, and political risk. These all factors have been major determinants of FDI in developed countries. Their focus has been more on factors of source countries making them responsible to invest in host countries. Geographical proximity between host and source countries is a major factor in determining FDI. On the other hand, technology, communication infrastructure, governance factors such as corruption, rule of law, foreign exchange reserves and foreign aids are under taken into consideration in studies conducted on developing nations and these factors have been significant in attracting FDI. Inflation rate have negative impact on FDI. Countries with large market size (GDP) having higher growth rates, higher proportion of international trade and a more open, business - friendly environment are prone to attract higher FDI inflows. Technology, & IT based techniques have become more locational advantages than cheaper labour. The results in case of India, is consistent with the results of developing nations. FDI inflows into India are found to be significantly determined by national income, tax rate, trade openness, and labour cost. Technology, R&D driven innovation capacities have made India as major FDI destination, reinforced by the quality of its human resources that is capable of handling complex technology.
Seema Rani: FDI in India Trend, Issues and Challenges: IJRCM Volume No. 4 (2014), Issue No . 09 idealised that a surge in foreign investments, rigid FDI policies resulted in a significant hindrance. However, due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region. FDI might prove to be an important source of financing the economic development of our nation. However, we must not forget that FDI alone can’t be a solution for poverty eradication, unemployment and other economic ills. Thus India while holding on to its current policy of sector selective FDI, must be on lookout for broadening its base while keeping in mind our nation specific socio-economic constraints so that an all beneficial FDI may lead our nation to the path of progress.
Abhinav: Foreign Direct Investment in India:Trend’s Study, National Monthly Refereed Journal of Research in Commerce & Management Volume 3, Issue 4 (April, 2014), concludes that the India emerges as the fifth largest recipient of foreign direct investment across the world. India is considered second largest country amongst all further developing countries and ranks fourth in the PPP in the world. So India has high potential to attract FDI inflow. The present study found that total FDI inflow in India from April 2000 to November 2013 is 311,398 US$ million. The study also reveals that Mauritius emerged as the most dominant source of FDI contributing 77,083.47 US$ million of the total investment in the country. Large part of FDI in India is contributed by fifteen countries which is 185506.59 US $ million. The services sector accounted for a steeply rising share of FDI stocks in India followed by construction development, Telecommunications and Computer Software & Hardware.
Bhavya Malhotra Global Journal of Business Management and Information Technology Volume 4, Number 1 (2014) states that India’s Foreign Direct Investment (FDI) policy has been gradually liberalised to make the market more investor friendly. The results have been encouraging. These days, the country is consistently ranked among the top three global investment destinations by all international bodies, including the World Bank, according to a United Nations (UN) report. For Indian economy which has tremendous potential, FDI has had a positive impact. FDI inflow supplements domestic capital, as well as technology and skills of existing companies. It also helps to establish new companies. All of these contribute
to economic growth of the Indian Economy
Dr. S. Jayaraj & Adewale Adeniyi-Kie Determinants Of Foreign Direct Investment Inflows into India: A Factor Analysis Volume No. 3 (2013), Issue No. 08 (August) International Journal of Research In Commerce, Economics & Management, Jointly valued the FDI flows in India as instead of single variable measurement of the complex aspects of India’s investment environments, this study uses factor analysis to provide measures of the country’s investment environments. Regression analysis results have found that institutional quality, infrastructure development significantly influence the flow of foreign direct investment into India. However this study did not find the variable market size to emerge significantly. This suggests foreign firms may enter India without bothering too much about the size of the market because they can export from India, thanks to the liberalization drive of the country. The policy implication is India should continue to concentrate its efforts in building qualitative institutions along with infrastructure development in order to have much more impressive growth of FDI into India.
Dr. Jasbir Singh Role of Foreign Direct Investment in India: An Analytical Study International Journal of Engineering and Science Vol. 1, Issue 5 (October 2012), Concludes as the maximum global foreign investment’s flows are attracted by the developed countries rather than developing and under developing countries. Foreign investment flows are supplementing the scare domestic investments in developing countries particularly in India. However foreign investor never adopts environment friendly technique to maximize their profit. These investments met the financial requirement for building up the basic and essential infrastructure industries of priority sector. But we finds that the highest amount of FDI gone to financing sector, insurance sector, Real estate and Business services which is 33.05 percent of total cumulative inflow of FDI in study period in India. It’s a serious matter in context of foreign direct investment objectives. Main reason of this sifting is high risk and low profit in concern sectors. Because the FDI are associated with various types of risks which are expected to provide various linkages in the development of Indian economy. But there is an upward trend in the flows of foreign investment particularly in study period. India should provide the better environment for attracting the foreign investment through direct as well as indirect methods. Government should welcome inflow of foreign investment in such way that it should be convenient and favorable for Indian economy and enable us to achieve our cherished goal like rapid economic development, removal of poverty, internal personal disparity in the development and making our Balance of Payment favorable
Iram Khan: Impact of Foreign Direct Investment (Fdi) On Indian Economy: A Sectoral Analysis, IJRCEM Volume No. 2 (2012), Issue No. 8 His research paper illustrate that there has been positive impact of FDI on overall growth of the economy. India has registered tremendous growth in FDI inflows during last decade and total inflows crossed the level of US$ 30 million. But when it is compared with other countries and continents the figure of FDI inflows are not encouraging. It can be observed from above analysis that sectoral level of the Indian economy, FDI has helped to raise the output, productivity and export in some sectors. In this paper emphases given on the impact of FDI on Indian economy in terms of variables are GDP, EXPORT and GDCF. It resulted that there is significant impact of FDI on GDP, Export and GDCF in India. As the investment in the form of FDI inflows can boost efforts for the development in many ways, for instance boosting export, creating new employment opportunities, increasing technological capabilities and increasing total financial resources for overall development of the economy of the country. The paper also analyzes the impact of FDI inflows to the sectors on GDP in India. The tested hypothesis highlight that there is no impact of FDI inflows to sectors on GDP. There are the sectors having highest attraction of FDI inflows are Service, Telecommunication, Real Estate, Construction and Computer Hardware & Software sector instead of this FDI inflows to sectors are not very much impacting GDP in India. Hence, India needs to have financial resources to accomplish double digit growth rate and overall development of the country. For the openness of trade and favorable environment, FDI play a significant role so as to achieve the desired goals of the economy. This is a wide topic to be researched on. There are many more variables and sectors that can also be analyze as to know the impact of FDI on Indian Economy. And significance relevant toward the economy.
Siraj-Ul-Hassan Reshi: Fdi inflows in India trends and patterns International Journal Of Research In Commerce, Economics & Management Volume No. 2 (2012), Issue No. 4 Makes an attempt to analyse the prevailing patterns of foreign direct investment inflows into the country during different periods. The changing pattern reflects the growing investor’s confidence in the country. There have been substantial increases in FDI inflows since 1991. Government of India has taken many initiatives to attract FDI inflows, to boost the Indian economy since economic liberalization. As a result, India has received FDI inflows from 1991 to 2008-09 was 409, 122,919 crores respectively. The country- wise FDI inflows reveals that Mauritius is the top investing country in India, out of the FDI inflows. Mauritius share was 44% out of the total FDI inflows since 1991-2009 while as France share was only up to 1 % of the total FDI inflows. Considering the sectoral composition of FDI over the period of 1991-2006, shows that the largest recipient of such investment was the sector of electric equipment (including computer software and electronics). The share of this sector in cumulative FDI inflows over the period was 17.54%. But from the period 2006 to December 2009, the service sector enjoyed the highest share of 22% of FDI inflows as compared to other sectors of Indian economy. Regional distribution of FDI is probably one of the prominent indicators to gauge the local business investment climate with a strong implication for the state policy makers. The share of major FDI attracting regions in terms of percentage was about 76.63%, Mumbai tops the list with a share of 35.89 % of the total approved amount of FDI to India. However, the FDI inflows in Patna, Kanpur and Guwhati regions of the RBI were very less and both taken together are less than 1 % of the total.
There have been substantial increases in foreign exchange reserves accumulation in India during previous decades on account of foreign investment inflows. There is a marked difference between the foreign direct capital approved and its actual inflows. An insight into the facts shows that post approval hassles, setting up of foreign investment promotion council in place of Indian investment centre, ambiguous agenda of the state governments on foreign investment, overestimating Indian market non-competitive Indian banks, political instability and lack of interaction with credit rating agencies are the main factors behind the wide gap between impressive foreign investment approvals and sluggish and actual foreign direct investment inflows.
Pradeep : Trends and Patterns of FDI in India- An Analysis, International Journal Of Research In Commerce, Economics & Management Volume No. 1 (2011), Issue No. 4 Makes an analysis It emerges from the foregone analysis that overall inflow of foreign direct investment in India witnessed an increasing trends during the study period. Compound Annual Growth Rate (CAGR) of foreign direct investment inflow and foreign investment are 36.56 percent and 32.58 percent respectively during the whole period under study. Policy of the Indian Government related to SEZ is mainly responsible for the FDI inflows. It is because government announced the SEZ Act, SEZs scheme was launched with the specific intend of providing an internationally competitive and hassle free environment for exports. SEZs are being increasingly perceived as a major sources of attracting FDI across the global markets. The country wise analysis found that Mauritius has been the largest direct investor in India. Mauritius has low rates of taxation and an agreement with Indian double tax avoidance regime. The United States (US) is the second largest investor in India. To take advantage of double tax avoidance regime, many companies have set up dummy companies in Mauritius before infesting to India. Sector wise analysis that the services sector has attracted largest amount of foreign direct investment inflows within 19.42 percent of total FDI inflows during the period 1992 to 2009.The state wise trends in FDI shows that the RBI’s regional offices at Maharashtra, New Delhi, Karnataka, Tamil Nadu and Gujarat have been the largest recipients of FDI. These states are either known for their strong industrial base or as software hubs. The key sectors attracting FDI to the Mumbai-Maharashtra region are energy, transportation services, telecommunications and electrical equipment. Delhi attracts FDI inflows in sectors like telecommunications, transportation, electrical equipment and services. The states of Uttar Pradesh and Haryana have also performed really well in recent years due to its abundance of natural resources, Uttar Pradesh attracts FDI in chemical, pharmaceuticals and minerals whereas Haryana attracts FDI in the electrical equipment, transportation and food processing sectors.
Tamil Nadu has done well in sectors related to automotive and auto components. Andhra Pradesh and Karnataka have attracted FDI mainly in areas associated with software and to a lesser extent, hardware for computer and telecommunication
Khondoker Abdul Mottaleb & Kaliappa Kalirajan “Determinants of Foreign Direct Investment in Developing Countries: A Comparative Analysis” ASARC Working Paper 2010/13 They concludes as bridging the gap between domestic savings and investment and by enhancing knowledge spillover, FDI can play important role in industrial advancement and economic growth in the developing countries. Although most of the developing countries have been taking measures to attract FDI, such as by offering incentive packages and liberalizing the trade regimes, only a few, mostly lower middle income countries and Asian countries with large domestic market are successful in attracting FDI. In this study, we tried to find out the influential factors that determine the FDI inflow to the low income and lower middle income countries and Asian and African and Latin American countries. To find out the influential factors, firstly we
examine the simple correlation coefficient between FDI inflow and the seemingly influential variables and secondly, we compare the characteristics between lower middle income countries and low income countries and Asian and African and Latin American countries. We found that in general lower middle income countries and Asian countries are highly successful in attracting FDI compared to low income and African and Latin American countries. Our findings show that most of the lower middle income countries and Asian countries, besides their large domes market, highly linked with the global market through international trade and offer more business friendly environment to the investors. Finally, in the estimated empirical model it is also found that besides GDP size and its growth rate, linkage with the global market through international trade, relationship with the major donor countries in the form of foreign aid and business friendly environment measured by the days required to start a business are the most important and significant factors in determining FDI inflow to the developing countries. Interestingly, our finding reinvigorates the positive role of foreign aid to developing countries in attracting FDI. The findings are robust across the countries and income groups. Thus, the paper concludes that small developing countries across the globe can attract substantial amount of FDI just by adopting more outward oriented trade policy and by providing more business friendly environment to the foreign investors.
Wijeweera, Albert & Mounter, Stuart “ A Var Analysis On The Determinants Of Fdi Inflows: The Case Of Sri Lanka” Applied Econometrics and International Development Vol. 8-1 (2008) Since economic reforms were introduced in 1977, Sri Lanka has experienced strong growth in inbound FDI. Plans by Sri Lanka’s government to encourage economic growth in the medium-term include significantly increasing FDI flows to the country (Asian Development Bank 2007). In this paper we examined the response of FDI inflows to Sri Lanka from changes in various macroeconomic variables. Major determinants of inbound FDI can be identified from the analysis. Our findings indicate that, of the five variables considered, the wage rate is the most important determinant of inbound FDI to Sri Lanka. Simulations showed that a one percent increase in the wage rate index would lead to a US$12 million decrease in FDI inflows. This finding confirms the cheap labour hypothesis. However, in order for Sri Lanka to sustain this comparative advantage, labour productivity growth is vital. In the long run, wage rate increases will detract from Sri Lanka’s viability as a foreign investment destination. Observations suggest that countries with very high labour costs can still attract FDI if higher productivity can compensate for higher wage rates. As expected, positive long-run relationships were found between FDI and real GDP, and between FDI and previous levels of FDI. This suggests that the size and strength of Sri Lanka’s economy, prior foreign investment levels in the country, and institutional credibility, including political stability, are also considerations of multinational companies decisions’ to invest in Sri Lanka. More open trade was similarly found to exert a positive influence on FDI inflows however, the positive effects dissipated quickly beyond the seventh year. The accumulated effects on inbound FDI from a depreciation of the Sri Lankan rupee against the US dollar were found to be negative at the end of the ten-year period, as were the accumulated effects of an increase in the domestic interest rate. In short, the evidence of this paper suggests that Sri Lanka should focus on the health of their major economic indicators, in particular the wage rate, GDP, exchange rates, interest rates, and the level of external trade, in designing policies that aim to attract FDI inflows.
Nidhiya Menon and Paroma Sanyal “Labor Conflict and Foreign Investments:
An Analysis of FDI in India” Review of Development Economics, 11(4), 629–644, 2007
This paper investigates the sensitivity of overseas investment to labor conflict across states in India, using a state-fixed effects approach. We find that foreign direct investment tends to veer away from states that have high incidences of labor conflict, particularly as measured by the number of man-days lost due to work stoppages. Furthermore, results of our fixed effects technique confirm that measures of labor conflicts are endogenous in an analysis of FDI location in India. We find striking evidence that labor disputes across states of India arise in a systematic fashion—state level heterogeneity measures have significant negative impacts on our labor conflict variable. This research has important implications for policy. Since FDI brings significant positive benefits, from a purely economic perspective, it may be prudent for state governments to try to reduce the incidence of labor disputes. Moreover, states with low FDI location propensities (either due to poor infrastructure, lack of educated workers, or the presence of a political climate that favors an overly militant workforce) should be provided with adequate incentives by the central government to move to fostering an environment more hospitable to investment from overseas. Such strategies will aid in improving FDI flows to developing countries such as India
Dr Maathai K. Mathiyazhagan “Impact Of Foreign Direct Investment On
Indian Economy: A Sectoral Level Analysis” ISAS Working paper November 2006
It can be observed from his analysis that at the sectoral level of the Indian economy, FDI has helped to raise the output, productivity and export in some sectors. However, it can be observed from the result of the PCONT that a very minimal relation in these variables (output, labour productivity and export) is established by the FDI inflows into the sectors. This may be due to the low flow of FDI into India both at the macro level as well as at the sectoral level. It implies that the spirit in which the economy has been liberalized and exposed to the world economy at the late eighties and early nineties has not been achieved after so many years. This calls for a judicious policy decision towards FDI at the sectoral level. Therefore, in the eve of India's plan for further opening up of the economy, it is advisable to open up the export oriented sectors and a higher growth of the economy could be achieved through the growth of these sectors
Significant Research Gaps
The major achievement for advancing the FDI flow is to acquire the fiscal growth as well as the social growth being a developing country where the major focus being on the welfare of society taken as prime role of democracy. However the same is missing or yet to be achieved by India. As some national and international data cannot be acquired online and has restricted allowance of publication from the governments the statistical secondary data has limited sources. To have a better outcome of study full contribution of government is necessary. With reference to that comparative analysis the study has restrictions in obtaining data of FDI in India. Also very few research data is available like reference [Nidhiya Menon and Paroma Sanyal],Labour unrest/employability and skill development through FDI is matter of research for the better understanding of FDI results to India and FDI’s even distribution to various states of India. The limitation of the study is that the reviews are based on theoretical analysis and does not have any empirical analysis or limited empirical analysis, this need to be done on field if the statutory bodies permits.
Conclusion
For Indian economy which has tremendous potential, FDI has a positive impact. FDI inflow supplements domestic capital, as well as technology and skills of existing companies. It also helps to establish new companies. All of these contribute to economic growth of the Indian Economy. Excluding the long help limited foreign invested policy in 1991, India has planned to get a greater stake of FDI inflows compared to the other Asian economies. Growing opportunities like further simplification of rules and regulations, enhancement of infrastructure are expected to provide a more growth to the FDI inflows. The investments of FDI will obviously depend on local economic situations, global economic trends of global investors. Regional distribution is more unfair even though the FDI inflow is increasing to India. The enhancement of infrastructural facilities and creation of sound economic and political environment should be maintained by both central and state government to make sure of the fairest regional distribution. In addition, the states of Maharashtra, Karnataka and Gujrat state government should take attractive investment policy. The key step should be taken politically. Since power a transport network are the foundation of industrialisation the growth of infrastructure should be an immediate need of time. Bureaucratic hassles, to draw more FDI
inflow the fraud and time consuming procedures have to be reduced. For a beneficial and secure FDI inflow in India the investment system should be more transparent.
India’s Foreign Direct Investment (FDI) policy has been gradually liberalised to make the market more investor friendly. The results have been encouraging. These days, the country is consistently ranked among the top three global investment destinations by all international bodies, including the World Bank, according to a United Nations (UN) report.