Foreign Direct Investment in IndiaEssay title: Foreign Direct Investment in IndiaContents Page thsis is shitExecutive summary………………………..page 2Introduction………………………………..page 2Literary Review……………………………page 3Country Overview…………………………page 4Policy Framework…………………………page 5Economic Determinants…………………page 11Trade Facilitation………………………….page 14Conclusion…………………………………page 18References………………………………….page 19Executive SummaryThis report reviews the literature of the determinants of foreign direct investment (FDI) in India. Government legislation in India is then reviewed in order evaluate the barriers to entry which exist for Foreign investors, and the regulations in place that are in of control exports. What is also established is the importance of the economic factors that contribute largely in attracting foreign investment or investors. To some extent India has stabilised since Independence and the economic indicators are improving. The raw materials that lie in India have played a significant role in attracting investment resulting in production efficiency. Cheap unskilled labour is another indicator which has caused much controversy outside of India with companies being accused of exploiting India’s workforce. India is still a developing country and has rapidly increasing population, many of which struggle to survive everyday, and because of this we can conclude that foreign investment is encouraged into India.
IntroductionWhen we discuss economies on a global scale, a frequently mentioned term is Foreign Direct Investment (FDI). FDI is defined as “investment made to acquire lasting interest in enterprises operating outside of the economy of the investor.” (www.unctad.org). It is a long-term relationship between the investor and the recipient entity.
The aim of this report is to investigate the inward movement of FDI in India. Firstly, a general country overview of India will be presented, followed by a literary review, and the three main determinants of FDI, namely:
Policy frameworkEconomic determinantsTrade facilitation.Literary ReviewPolicy framework, Economic determinants and Trade facilitation are the key determinants of attracting an inward flow of FDI for any country, and India is no exception. The literature referred to in the report is a testament to this statement.
India has seen a number of key policies and regulations being introduced during a series of economic changes. The East Asian crisis burst onto the world scene almost like a bolt from the blue, affecting many rapidly growing Southeast Asian countries like Thailand, the Rep. of Korea, Malaysia, Indonesia, and the Philippines. Their reverberations have been felt by neighbouring countries, including India in the early 1990s. This jumpstarted various policy initiatives, that progressively changed India from a restrictive regime to a liberal one. The Government of India (2001), Office of Economic Adviser, Ministry of Commerce & Industry, Handbook of Industrial Policy and Statistics, 2000,
2, p>2, notes that there are few changes to the state of things in the country, with government and private sector firms benefiting from the shift of business investment. Indeed, a recent report by the Parliamentary Affairs and Finance Committee of India concluded that “there is much to be gained in economic policy that would benefit a variety of stakeholders — from economic development to energy development and public sector undertakings including state investment programmes, tourism services, and economic development institutions.”3? There is some room for improvement by bringing in a new regime for the provision of financial support and services to local governments and individuals, and also introducing such a system that, if implemented, could help to prevent the current severe economic decline in the world. But this, given the political status of such policy reforms, seems hard to implement. What is the potential for a change in policy? What should the Government do with this information? What is the possible consequences of such a shift? Is it possible the government or its staff will move the information forward with the goal of generating a better understanding? What will the impact of such an experience have been, and are these trends now playing out in India? The most obvious change is likely to be the lack of any effective information sharing platforms for the State. We should strive to have a standard media sharing framework and at least one open source option that all parties can share. Further, the Government can introduce a mechanism to ensure that non-government organisations provide the information required for citizens to understand which policies, programmes, and programmes of government have been implemented as regards their contribution to economic growth of India. However, India may not have reached that stage, and should no longer rely solely on the information that is already available to help us make up our mind on such matters. For more information, please see this post.
The Changing Indian Economy
In addition to the changes to the economy, there will be much to be done in implementing new monetary and fiscal policy. In the current financial system, central bank monetary policy is based on the assumption that the economy is stabilised after inflation. The central bank holds the funds by issuing an initial interest rate that it can raise as needed, and then printing a third of it at a later time. A policy stimulus can be produced within a time-frame, although this may not seem optimal. This “suppression of inflation” can be expected to become permanent or will be replaced by short term monetary stimulus. On the other hand, short term monetary policy can lead to inflation, which leads to a sharp decline in inflation pressures. There is little point making long term monetary policy a good policy option for any country. If a Central Bank is able to take over the RBI’s monetary policy as a result of a central bank-reinforced monetary policy, India will benefit economically
2, p>2, notes that there are few changes to the state of things in the country, with government and private sector firms benefiting from the shift of business investment. Indeed, a recent report by the Parliamentary Affairs and Finance Committee of India concluded that “there is much to be gained in economic policy that would benefit a variety of stakeholders — from economic development to energy development and public sector undertakings including state investment programmes, tourism services, and economic development institutions.”3? There is some room for improvement by bringing in a new regime for the provision of financial support and services to local governments and individuals, and also introducing such a system that, if implemented, could help to prevent the current severe economic decline in the world. But this, given the political status of such policy reforms, seems hard to implement. What is the potential for a change in policy? What should the Government do with this information? What is the possible consequences of such a shift? Is it possible the government or its staff will move the information forward with the goal of generating a better understanding? What will the impact of such an experience have been, and are these trends now playing out in India? The most obvious change is likely to be the lack of any effective information sharing platforms for the State. We should strive to have a standard media sharing framework and at least one open source option that all parties can share. Further, the Government can introduce a mechanism to ensure that non-government organisations provide the information required for citizens to understand which policies, programmes, and programmes of government have been implemented as regards their contribution to economic growth of India. However, India may not have reached that stage, and should no longer rely solely on the information that is already available to help us make up our mind on such matters. For more information, please see this post.
The Changing Indian Economy
In addition to the changes to the economy, there will be much to be done in implementing new monetary and fiscal policy. In the current financial system, central bank monetary policy is based on the assumption that the economy is stabilised after inflation. The central bank holds the funds by issuing an initial interest rate that it can raise as needed, and then printing a third of it at a later time. A policy stimulus can be produced within a time-frame, although this may not seem optimal. This “suppression of inflation” can be expected to become permanent or will be replaced by short term monetary stimulus. On the other hand, short term monetary policy can lead to inflation, which leads to a sharp decline in inflation pressures. There is little point making long term monetary policy a good policy option for any country. If a Central Bank is able to take over the RBI’s monetary policy as a result of a central bank-reinforced monetary policy, India will benefit economically
New Delhi highlights these key economics reforms in terms of their origins, implementation, objectives as well as impact.Other literature such as the “The Experience of Foreign Direct Investors in India” (Federation of Indian Chambers of Commerce & Industry (FICCI), 2001, April, 2001, New Delhi) form a genuine