FDI AND ITS IMPACT ON INDIAN ECONOMY


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Foreign direct investment (FDI) refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise.

FDI in India:-

Starting from a baseline of less than $1 billion in 1990, a recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI.
FDI in 2010 was $24.2 billion, a significant decrease from both 2008 and 2009.[9] Foreign direct investment in August 2010 dipped by about 60% to aprox. $34 billion, the lowest in 2010 fiscal, industry department data released showed.[10] In the first two months of 2010–11 fiscal, FDI inflow into India was at an all-time high of $7.78 billion up 77% from $4.4 billion during the corresponding period in the previous year.
The world’s largest retailer WalMart has termed India’s decision to allow 51% FDI in multi-brand retail as a “first important step” and said it will study the finer details of the new policy to determine the impact on its ability to do business in India.However this decision of the government is currently under suspension due to opposition from multiple political quarters.

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, Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from http://dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
Indian companies having foreign investment approval through FIPB route do not require any further clearance from the Reserve Bank of India for receiving inward remittance and for the issue of shares to the non-resident investors.

FDI can have some positive results on the economy, triggering a series
of reactions that in the long run can lead to greater efficiency and improvement of living standards, apart from greater integration into the global economy. Supporters of FDI in retail trade talk of how ultimately the consumer is benefited by both price reductions and improved selection, brought about by the technology and know-how of foreign players in the market. This in turn can lead to greater output and domestic consumption.

The Impact of FDI on India’s Manufacturing Sector

Foreign direct investment (FDI) has risen considerably in post-reform India. The work and category of FDI has changed significantly since India has opened up to world markets. This has fueled high prospect that FDI may serve up as a channel to advanced economic growth. However, it turns out that the development effects of FDI differ extensively across sectors. FDI stocks and production are equally reinforcing the domestic manufacturing sector.