As the largest country in the south Asian subcontinent, India is not only one of the oldest ancient civilizations, but it also is one of the fastest growing countries in the world. In India the development of the software industry is outstanding, also the finance, research, technical and services industry is developing rapidly. From 2011 to 2012 the gross domestic product (GDP) of India was growing from 1710.9 billion of U.S. dollars to 1872.9 billion which is near 9.5% increase (see figure 1). For this reason more and more oversea company pay more attention to the India, also more and more foreign direct investment (FDI) choose into the Indian market. This report discusses that what effect from the Indian political economy make to the FDI.
The political economy
The political economy is include the political system, the economic system and legal system, they not only will make effect to the FDI, but they also affect each other. The economic development must rely on the government to provide some economic environment with suitable political and legal. However the political and legal are part of the superstructure which determined by the economic base (K Marx, 1859). Now it will be showed that how these three systems impact on FDI in India.
First a tranquil political system can make more attention for FDI. Nowadays the Indian internal political state is very stable, and the relationship between India and other is peaceful and friend. There are no any chance for civil war or war between India and other in the coming decades. And from the independence in 1947, India has never interrupted to use the FDI, but it expand the using of foreign capital which was beginning from one political decision which is an economic reform in early 1990s. The direction of Indian reform is changing the economy from a state-led one to a market one, thereby increase economic efficiency and boost development of economy. For...