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UTMS Journal of Economics, Vol. 1, No. 2, pp. 1-16, 2010 M. Shamim Ansari, M. Ranga: INDIA’S FOREIGN DIRECT INVESTMENT: CURRENT STATUS ...

Original scientific paper Received: 27.06.2010

INDIA’S FOREIGN DIRECT INVESTMENT: CURRENT STATUS, ISSUES AND POLICY RECOMMENDATIONS Mohd. Shamim Ansari Mukesh Ranga
Bundelkhand University, Jhansi (UP) India CSJM University, Kanpur (UP) India1 Abstract: Foreign Direct Investment (FDI) as an important driver of growth. It is an important source of non debt financial resources for country for economic development. Besides it is a means of achieving technical knowhow and employment generation of employment. However, many are of the view that FDI is a big threat to sovereignty of host and domestic business houses. Faster exploitation of natural resources for profit may deprive host from such resources in long run. Midst of debate on pros and cons of FDI, world economy has observed a phenomenal change in volume and pattern of FDI. There is clearly an intense global competition of FDI. India is not behind this global race of attracting foreign investment. India emerged as an attractive FDI destination in services but has failed to evolve a manufacturing hub which has greater economic benefit. FDI though one of the important sources of financing the economic development, but not is not a solution for poverty eradication, unemployment and other economic ills. India needs a massive investment to achieve the goals of vision 20-20. Policy makers need to ensure transparency and consistency in policy making along with comprehensive long term development strategy. Key words: Foreign Direct Investment (FDI), analysis of investments in India, flow of FDI, policy recommendation.

INTRODUCTION Foreign Direct Investment (FDI) is now regarded as an important driver of growth. Emerging Market Economies (EMEs) look upon FDI as one the easiest means to fulfill their financial, technical, employment generation and competitive efficiency requirements. Gradually they also realized that substantial economic growth is inevitable without global integration of business process. This created opportunities for locational advantages and thus facilitated strategic alliances, joint ventures and collaborations over R & D. 1 Mohd. Shamim Ansari, PhD., Assistant Professor, Institute of Economics and Finance, Bundelkhand University, Jhansi (UP) India, Mukesh Ranga, Ph.D., Professor, Institute of Business Management, CSJM University, Kanpur (UP), India.

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UTMS Journal of Economics, Vol. 1, No. 2, pp. 1-16, 2010 M. Shamim Ansari, M. Ranga: INDIA’S FOREIGN DIRECT INVESTMENT: CURRENT STATUS ...

The world economy has observed a phenomenal change in volume and pattern of FDI flow from developed nations to EMEs in 1980s and 1990s compared to earlier decades. The hostile attitude of developing nations regarding multinationals investment has become generous during this transition period. FDI was fostered by liberalisation and market-based reforms in EMEs. The financial sector deregulation and reforms in the industrial policy further paved the way for global investments. There is clearly an intense global competition for FDI. India has emerged as the second most attractive destination for FDI after China and ahead of the US, Russia and Brazil. In view of these facts, the present paper takes stock of current status of FDI in India, aims to find reasons for comparatively lesser flow of FDI and suggest measures to boost flow of FDI to India.

LITERATURE REVIEW Review of various literatures available on FDI reveals that foreign investment is still a matter of debate. Whether FDI is boom or bane for host countries economic growth and development? Opinions are still divided. FDI has its own advantages and disadvantages. Many scholars argue that through FDI developed nations may try to invade the sovereignty of host country. In order to earn quick profit they may exploit the natural resources at the faster rate and thus...
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