FOREIGN DIRECT INVESTMENT

AND INDIAN ECONOMY

Dr. Shoukat ali M Magalmani
HOD and Associate Professor
Department of Economics
JSS Banashankari Arts, Commerce and S K Gubbi
Science College, Vidyagiri
Dharwad. 580004
E-mail:
smmegalmani@yahoo.co.in Mob.
9448529867
 INTRODUCTION
 FDI means “cross-border investment by a resident entity in
one economy with the objective of obtaining a lasting
interest in an enterprise resident in another economy”.
 Or ‘capital inflows from abroad that is invested in or to
enhance the production capacity of the economy’.
 FDI is considered to be the life blood for
developing nations.
 It provides opportunity for technological transfer and
up gradation and others.
 It helps in broaden the market accessibility for both host
and home countries.
 It helps in invention and innovation of
international markets
BENEFITS OF FDI FOR HOST COUNTRIES
• Both host country and home get benefit from
FDI
• Host country means that country which accept
the FDI from other countries and use this for
its economic development
• Home country means that country which
supply its abundance resources and widen its
market.
 BENEFITS OF FDI FOR HOST COUNTRIES
1. Policy framework for FDI
• Economic, political, and social stability
• Rules regarding entry and operations
• Standards of treatment of foreign affiliates
• Policies on functioning and structure of markets (especially
competition and policies governing mergers and
acquisitions)
• International agreements on FDI
• Privatization policy
• Trade policy (tariffs and nontariff barriers) and coherence of
FDI and trade policies
• Tax policy
 BENEFITS OF FDI FOR HOST COUNTRIES
2. Economic determinants& Business
facilitation
• Investment promotion
• Investment incentives
• Hassle costs to corruption and
(related administrative
efficiency)
• Social amenities
 BENEFITS OF FDI FOR HOST COUNTRIES
3. Market-seeking
• Market size and per capita income
• Market growth
• Access to regional and global markets
• Country-specific consumer preferences
• Structure of markets
4. Resource/asset-seeking
• Raw materials
• Low-cost unskilled labor
• Skilled labor
• Technological, innovative, and other created assets (for example,
brand names), including as embodied in individuals, firms, and
clusters
• Physical infrastructure (ports, roads, power, telecommunications)
BENEFITS OF FDI FOR HOST COUNTRIES
5. Efficiency seeking
• Cost of and assets listed
resourcesfor labor productivity
adjusted above,
• Other input costs, such as transport and
communication costs to/from and within host
economy and other intermediate products
• Membership of a regional integration
agreement conducive to the establishment of
regional corporate networks
 OBJECTIVES OF THE STUDY
• To know the historical growth of FDI inflow
into India.
• To distinguish the flow of FDI pre and post
reform period.
• To identify the flow of FDI from across the
countries and states.
• To analyse the sector wise flow of FDI.
• To point out the findings and policy
suggestions.
Top Ten Country-wise FDI Equity Inflows to India from
April, 2000 to July, 2014

S.No Name of the Amount of FDI %age with total

Country Inflows (Rs. in FDI Inflows
crore) (+)
1 Mauritius 390691.18 35.88
2 Singapore 135784.52 11.88
3 United Kingdom 105795.83 9.46
4 Japan 85639.02 7.49
5 Netherlands 65256.29 5.57
6 U.S.A 57835.90 5.38
7 Cyprus 37349.33 3.38
8 Germany 33486.48 2.99
9 France 19398.74 1.75
10 Switzerland 13801.42 1.23
 Inflow of FDI from Top 10 Countries in
the World
450000
400000
350000
Amount of FDI Inflow

300000
250000
200000
150000
100000
50000
0

Countries
S. State-wise Inflows of FDI Cumulative %age
No. FDI ( 2000 to
to 2014) total
Inflows
1 MAHARASHTRA, DADRA & NAGAR HAVELI, 328,166 30
DAMAN & DIU
2 DELHI, PART OF UP AND HARYANA 216,274 19
3 TAMIL NADU, PONDICHERRY 71,017 6
4 KARNATAKA 63,294 6
5 GUJARAT 45,627 4
6 ANDHRA PRADESH 45,160 4
7 WEST BENGAL, SIKKIM, ANDAMAN & NICOBAR 13,584 1
ISLANDS
8 CHANDIGARH, PUNJAB, HARYANA, HIMACHAL 6,227 0.6
PRADESH
9 RAJASTHAN 6,623 0.5
10. MADHYA PRADESH, CHATTISGARH 6,095 0.5
11 KERALA, LAKSHADWEEP 4,893 0.4
12 GOA 3,710 0.4
13 UTTAR PRADESH, UTTRANCHAL 1,965 0.2
14 ORISSA 1,926 0.2
15 ASSAM, ARUNACHAL PRADESH, MANIPUR, 352 0
MEGHALAYA, MIZORAM, NAGALAND, TRIPURA
16 BIHAR, JHARKHAND 247 0
17 JAMMU & KASHMIR 26 0
18 REGIONS NOT INDICATED# 292,906 26.06
19 TOTAL 1,108,091 100
 Sector-wise FDI Equity Inflow from
April, 2000 to July, 2014
Sl. No Sectors FDI Inflow (Rs. In Percentages of
Crores) Total FDI Inflow
1 Service 191752.15 17.73
2 Construction 111127.49 10.40
3 Telecommunication 80608.47 7.23
4 Computer Software & 61707.07 5.76
Hardware
5 Drugs &Pharmaceuticals 61340.03 5.47
6 Automobile Industry 49678.09 4.41
7 Chemicals (Other than 47538.99 4.40
Fertilizers)
8 Power 44667.08 4.05
9 Metallurgical Industry 39225.17 3.60
10 Hotel & Tourism 38030.37 3.25
 Sector-wise inflow of FDI
(Rs. in Crores)
Hotel & Tourism,
Metallurgical
38030.37
Industry, 39225.17
Service,
Power, 44667.08
191752.15

Chemicals ,
47538.99

Automobile
Industry, 49678.09
Drugs
&Pharmaceuticals Construction ,
, 61340.03 111127.49
C
o
m Telecommunicati
p o n , 80608.47
u
t
e
 POLICY PRESCRIPTIONS
• Government should ensure the equitable distribution of FDI
inflows among states.
• Government must target at attracting specific types of FDI
that are able to generate spillovers effects in the overall
economy.
• The must promote policies which allow
government process starts from within (i.e. through
development
productive capacity and by absorptive capacity)..
• Government must pay attention to the emerging Asian
continent as the new economic power – house of business
transaction.
• It is suggested that the policy makers should ensure optimum
utilization of funds and timely implementation of projects.
Thank you