Foreign Investment

In Multinational Corporations
Indian Economic Journey
ØInternational Trade

ØIndia in the Economic Race

ØBased on Debt-Creating Capital Inflows

ØEconomic Reforms-1991

ØPost-1991
FOREIGN PORTFOLIO
INVESTMENT
Important type of capital flow

Reduces risks

Liberalization plays important role

Accounts for one third of net

capital flows
BENEFITS
Helps in reduces risks

Developing countries considered

it as welcome means for raising
capital

Provide finance
FOREIGN DIRECT
INVESTMENT

FOREIGN DIRECT
INVESTMENT
Merits of FDI
No burden on tax payers

Partof profits are ploughed in

business

FDI in Exports

Flexible returns in direct investment

FDI makes a major contribution to

Liberalization phase of
FDI
THREE PROBLEMS IN 1980s
(1) EXTERNAL COMMERCIAL BORROWING
(2) EXTERNAL ASSISTANCE
(3) INFLOW UNDER NON-RESIDENT
BANK DEPOSIT

FII permitted – 40% equity capital of a

business enterprise
Contd….
FDI allowed – 51% of equity capital in 34
industries
100% PARTICIPATION IN EXPORT ORIENTED
units
(eous)
Infrastructure
49% in telecommunications
50% in mining
50% in hotel & tourism allowed
under automatic route 100% was permitted for
all manufacturing activities.
FDI Flows in India
Role of multinational
corporations in Indian
economy.
Post reforms period
•Promotion of foreign investment.

•Non-debt creating capital inflows.

•Technology transfer.

•Promotion of exports.
Role of multinational
corporations
Agreement with local firms for
sale of MNCs products.

Setting up of subsidiaries.

Branches multinational
corporation.

Foreigncollaboration or joint
ventures.
world’s some important non-
financial multinational
Critique of MNC’s
 Capturing Markets

 Capital intensive techniques

 Inessential consumption

 Import of obsolete technology

 Polluting environment

 Volatility in Exchange rates

Conclusion
Growth

Restrictions

Foreign Currency

Standard of living

Global Market
Thank you