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In: Economics

Use the United National Conference on Trade and Development FDI Database (available under the Statistics option...

Use the United National Conference on Trade and Development FDI Database (available under the Statistics option at unctad.org) to research the foreign direct investment profile of a country or region of your choice.

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I have taken India as my choice and below are the details of foreign direct investment, India has the richest human resource country. Population is more than 130+ crores people and current GDP is $2259642 Million and capital per income growth is 4.94% and GDP growth of 7.11%.

FDI takes vital part in the development of both developing and developed countries. FDI has been associated with improved economic growth and development in the host countries which has led to the emergence of global competition to attract FDI. FDI offers number of benefits like overture of new technology, innovative products, and extension of new markets, opportunities of employment and introduction of new skills etc., which reflect in the growth of income of any nation. Foreign direct investment is one of the measures of growing economic globalization. I

Investment has always been an issue for the developing economies such as India. The world has been globalizing and all the countries are liberalizing their policies for welcoming investment from countries which are abundant in capital resources. The countries which are developed are focusing on new markets where there is availability of abundant labors, scope for products, and high profits are achieved. Therefore Foreign Direct Investment (FDI) has become a battle ground in the emerging markets.

Foreign investment plays a significant role in development of any economy as like India. Many countries provide many incentives for attracting the foreign direct investment (FDI). Need of FDI depends on saving and investment rate in any country. Foreign Direct investment acts as a bridge to fulfill the gap between investment and saving. In the process of economic development foreign capital helps to cover the domestic saving constraint and provide access to the superior technology that promote efficiency and productivity of the existing production capacity and generate new production opportunity.

India’s recorded GDP growth throughout the last decade has lifted millions out of poverty & made the country a favoured destination for foreign direct investment. A recent UNCTAD survey projected India as the second most important FDI destination after China for transnational corporations during 2010-2015. Services, telecommunication, construction activities, computer software & hardware and automobile are major sectors which attracted higher inflows of FDI in India. Countries like Mauritius, Singapore, US & UK were among the leading sources of FDI in India. FDI inflow routes:

An Indian company may receive Foreign Direct Investment under the two routes as given under:

1. Automatic Route: FDI in sectors /activities to the extent permitted under the automatic route does not require any prior approval either of the Government or the Reserve Bank of India.

2. Government Route: FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, and Ministry of Finance.

FDI is not permitted in the following industrial sectors:

· Arms and ammunition.

· Atomic Energy,

· Railway Transport.

· Coal and lignite.

· Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.

· Lottery Business

· Gambling and Betting

· Business of Chit Fund

· Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and fllied sectors) and Plantations activities (other than Tea Plantations) .

· Housing and Real Estate business

· Trading in Transferable Development Rights (TDRs)

· Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

An analysis of the recent trends in FDI flows at the global level as well as across regions/countries suggests that India has generally attracted higher FDI flows in line with its robust domestic economic performance and gradual liberalization of the FDI policy as part of the cautious capital account liberalization process. Even during the recent global crisis, FDI inflows to India did not show as much moderation as was the case at the global level as well as in other EMEs. However, when the global FDI flows to EMEs recovered during 2010-11, FDI flows to India remained sluggish despite relatively better domestic economic performance ahead of global recovery. This has raised questions especially in the backdrop of the widening of the current account deficit beyond the sustainable level of about 3 per cen.

it is pertinent to highlight the number of measures announced by the Government of India on April 1, 2011 to further liberalize the FDI policy to promote FDI inflows to India. These measures, inter alia included (i) allowing issuance of equity shares against non-cash transactions such as import of capital goods under the approval route, (ii) removal of the condition of prior approval in case of existing joint ventures/technical collaborations in the „same field?, (iii) providing the flexibility to companies to prescribe a conversion formula subject to FEMA/SEBI guidelines instead of specifying the price of convertible instruments upfront, (iv) simplifying the procedures for classification of companies into two categories – „companies owned or controlled by foreign investors? and „companies owned and controlled by Indian residents? and (v) allowing FDI in the development and production of seeds and planting material without the stipulation of „under controlled conditions?. These measures are expected to boost India’s image as a preferred investment destination and attract FDI inflows to India in the near future.


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