Trends of FDI Inflows in India
||4th December 2017
Foreign Direct Investment (FDI) is a key element in international economic integration. FDI inflows mean the investment which a country receives from other countries, which in turn help the host country to have access to new technologies, capital and organizational technologies and management skills. FDI creates direct, stable and long-lasting links between economies. It encourages the transfer of technology and know-how between countries. It provides a win-win situation to the host and the home countries. While it offers opportunities of employment and introduction of new skills, etc. in the home country, it allows the host economy to promote its products more widely in international markets.
In India, FDI is considered as a development tool, which can help in achieving self-reliance in all the sectors of the economy. India’s rich and diversified resources, its sound economic policy, good market conditions and highly skilled human resources, made India as one of the attractive destination for foreign investments.
Today, India receives large FDI inflows in line with its robust domestic economic performance. the attractiveness of India can be ascertained from the increase in FDI inflows into India as depicts in Table 1 from 1980 to 2016. During eighties, India’s FDI inflows were very minimal – around $0.08 billion. the complex legal and constitutional framework, restrictive and close door FDI policy were some of the major reasons behind this. FDI was allowed only in selected sectors subject to various conditions such as domestic equity participation, local content requirements, export obligation and local research and development (R&D) promotion. Such a restrictive policy did not provide an environment conducive to FDI in India. therefore, only a few f...