Foreign Direct Investment and the Economy of India (original) (raw)
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042 The growth of outward FDI and the competitiveness of the underlying economy : the case of India
2013
There has been an impressive spurt in the outward FDI activity of Indian MNEs since the 1990s. However, despite the rhetoric, this growth has not been exceptional, when compared to other similarly developed countries. Received economic arguments propose that successful outward investors tend to be the most competitive domestic firms in their home economy. Their firm-specific assets tend to be a function of the political economy and economic structure of the home economy. In IB terms, this means that the ownership-specific assets of Indian multinationals are a subset of the ownership assets of their parent companies, which in turn are largely determined by the location-specific assets of the home economy. The evidence suggests that the strengths and weaknesses in the location assets of India have caused pockets of excellence to emerge, but that these conditions do not lend themselves to a broader growth in competitiveness, meaning that further rapid growth is ultimately not sustainab...
Foreign Direct Investments in India Since Liberalisation: An Overview
Newsletter, 1997
For a long time India's approach towards foreign direct investment was governed by the multiple objectives of self-reliance, protection of national industry and entrepreneurs, import of select technologies and export promotion. As a part of the Structural Adjustment Programme, along with virtually dismantling the industrial regulatory system, India sought to attract FDI with special favours and persuasion. While the new regime places heavy emphasis on attracting large amount of FDI, there is very little discussion on the various facets of actual implementation. This paper seeks to provide empirical content to the developments during the first seven years of liberalisation.
Emerging MNCs: Trends, Patterns, and Determinants of Outward FDI by Indian Enterprises
New Dimensions of Economic Globalization, 2008
This article analyses the trends, patterns and determinants of outward foreign direct investment (OFDI) by Indian enterprises, which has increased markedly since the onset of reforms. It finds that the sharp rise in OFDI since 1991 has been accompanied by a shift in the geographical and sectoral focus of Indian investments. It develops an analytical framework for explaining the probability of an Indian enterprise investing abroad and undertakes empirical analysis using a large exclusive dataset of Indian enterprises. The findings suggest that Indian enterprises draw ownership advantages from accumulated production experience, cost effectiveness of their production processes and adaptations to imported technologies made with technological effort, and sometimes with the ability to differentiate the product. Firm size exerts a positive but nonlinear effect. Enterprises that are already engaged in exporting are more likely to be outward investors. Finally, policy liberalization of the 1990s has encouraged Indian enterprises to venture abroad.
World Development, 2011
One of the objectives of the economic reforms undertaken in India since 1991 was to open the doors for foreign firms to invest in the country leading to large scale FDI inflows to various industries in the Indian economy. Apart from the direct effect of bringing capital and technology, FDI is also an important conduit influencing the R&D activities in an economy. The presence of foreign firms as well as the entry of foreign firms leads to an increase in the competition in the domestic market. Therefore, in order to compete with the MNCs the domestic firms have to undertake R&D activities or obtain technology from other sources. Under this backdrop, this study attempted to examine the relationship between FDI and R&D of the domestic firms in the post-liberalization regime. To realise the objective, we have used an unbalanced panel data of 1843 Indian manufacturing firms operating during the period 1994-2005. In order to see the influence of FDI on R&D behaviour, we controlled for the firm specific heterogeneities like size, exports, technology imports, vertical integration and age in determining the R&D activities. An important contribution of the present paper is to correct for the self-selection problem by using a Heckman-two step procedure.
FDI and Economic Performance of Firms in India
Studies in Microeconomics, 2020
FDI contributed positively to sales, profit, employment and wages of firms in India from 2004 to 2018. Foreign capital is complementing domestic capital well embodying technology and innovations required for expansion of domestic firms in it. Foreign promoters have played quite significant economic roles among firms across production sectors in manufacturing industry in India. Besides sales, total expenses, managerial remunerations and corporation taxes, involvement of foreign promoters are statistically significant determinants of profits, employment and wages among firms across all seven sectors of the manufacturing industry is clear from analysis of the Prowess database for years 2004, 2008, 2012 and 2014. These effects were even stronger in each of Modi–I years between 2015-2019 that followed the Make in India initiative in 2014. Reforms including the outright 100 per cent ownership provision in the automatic route in most industrial sectors have produced good outcomes that have...
The determinants of outward foreign direct investment: a firm-level analysis of Indian manufacturing
Oxford Development Studies, 2004
Purpose -Outward foreign direct investment (FDI) of firms from Brazil, Russia, India and China has increased significantly during the last few years. Despite this trend, comprehensive research on the specific determinants and antecedents of outward FDI from BRIC countries is still underrepresented. The purpose of this paper is to give a more comprehensive understanding of outward FDI from BRIC countries. Design/methodology/approach -Based on an exploratory approach, case studies of eight companies were conducted. Both a within-case and a cross-case approach were conducted. Findings -The findings reveal the relevance of determinants on the country, industry and firm level. Gaining access to new markets is of utmost importance for all firms. Additionally, most companies seek to obtain access to technological resources and management know-how, therefore emphasizing the availability of these resources in the target countries. While the internationalization of Brazilian and Indian companies is primarily driven by economic motives, many Chinese and Russian firms also receive substantial political support from their governments to invest abroad, especially in strategically important industries. On the firm-level, the strength of firm-specific resources is highlighted. BRIC country firms possess specific strengths that help them to enter both developing as well as developed countries and to pursue their internationalization strategy. Originality/value -The aim of this study is to systematically analyze the determinants of FDI of firms from BRIC countries. While previous studies in this context are based on internationalization theories which were at least implicitly focused on FDI of firms from developed markets, the authors use a more emic approach and look for specific determinants of outward FDI of firms originating in BRIC countries.
Inward FDI and firm-specific advantages of Indian manufacturing industries
2011
The unprecedented growth of international productions and Foreign Direct Investment (FDI) flows over the last two decades has led to the upsurge in scientific investigation into the distinctive facets of FDI. Despite the considerable amount of research undertaken, it seems that there is very little comprehensive economic analysis of FDI flows with respect to Indian firms. The present study attempts to bridge this gap by answering the following research question: what are the micro-level causes of FDI inflow, i.e. what are the determinants or pull factors of FDI inflow into Indian domestic firms? In order to analyze this question the study uses a panel data structure constructed over the recent 5 years, ranging from 2006 to 2010 and covering 22 sectors in Indian Manufacturing Industries. Adoption of Fixed and Random effects estimation procedure help to identify that among a set of firm-specific factors, only technological intensity, both inhouse and import along with product differentiation have negatively contributed for foreign investors" shareholding of local firms. The export performance, age, asset size and sales volume are among other remaining firm-specific characteristics which lack effective pulling effects in attracting FDI.
THE TREND AND ROLE OF FOREIGN DIRECT INVESTMENT IN INDIAN ECONOMY.pdf
Review of Research, 2019
FDI is a significant vehicle for the transfer of technology from the developed countries to the rest of the world. Since 1991, the government of India started introducing changes in its economic policy and liberalised its policies towards foreign direct investments. Even before 1991, the foreign investors identified India as an important hub for foreign investment. Once the economy was opened, the inflow of investments into the country increased 20 times more than the previous periods. These investments lead to economic growth through creating new employment opportunities, developing new managerial expertise, new markets and new network for distribution. FDI inflow into India has helped to reach a certain degree of stability in its financial status; its ability to compete with the global economy. Above all the flow of the FDI into the Indian economy made India as a central point of global production chains of MNCs, across various production locations spread around the world. The study finds a strong positive interaction between FDI and India’s international trade. KEYWORDS: FDI Inflow, GDP, Import, Export, Economic Growth.
A Critical Study on the Role of Foreign Direct Investment in India
Tij S Research Journal of Social Science Management Rjssm, 2013
Foreign direct investment (FDI) as a strategic component of investment is needed by India for achieving the economic reforms and maintains the pace of growth and development of the economy. FDI is a tool for economic growth through its strengthening of domestic capital, productivity and employment. FDI also plays a vital role in the up gradation of technology, skills and managerial capabilities in various sectors of the economy. The paces of FDI inflows in India initially were low due to regulatory policy framework but there is a sharp rise in investment flows from 2005 towards because of the new policy has broadened. The present descriptive and purely secondary based study has been undertaken with the objective to understand the role of FDI in India and effect of foreign inflows in economic growth of India. India is among the third most attractive destination by foreign companies and FDI brings a positive impact on country's GDP, foreign trade, employments are some of the major findings of the study. The paper concludes that the increased inflow of FDI in a country has given a major boost to the country's economy.
AN OVERVIEW OF FOREIGN DIRECT INVESTMENT IN INDIA
Excel International Journal of Multidisciplinary Management Studies, 2012
This paper attempted to make an analysis of FDI in India and its impact on growth. It also focuses on the determinants and needs of FDI, year-wise analysis, sectoral analysis and sources of FDI and reasons. One of the economic aspects of globalization is the fact that increasing investments in the form of foreign direct investments. In the recent times due to the global recession most the countries have not been able to pull investments. India has been able to attract better FDI’s than the developed countries even during the crisis period also. Especially in the recent years the FDI in India has been following a positive growth rate. Since 1991 the government has focused on liberalization of policies to welcome foreign direct investments. These investments have been a key driver for accelerating the economic growth through technology transfer, employment generation, and improved access to managerial expertise, global capital, product markets and distribution network. FDI in India has enabled to achieve a certain degree of financial stability; growth and development to sustain and compete in the global economy.