Foreign Direct Investment

Contents Page thsis is shit

Executive summaryвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..page 2

IntroductionвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..page 2

Literary ReviewвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦page 3

Country OverviewвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦page 4

Policy FrameworkвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦page 5

Economic DeterminantsвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦...page 11

Trade FacilitationвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.page 14

ConclusionвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦page 18

ReferencesвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.page 19

Executive Summary

This report reviews the literature of the determinants of foreign direct investment (FDI) in India. Government legislation in India is then reviewed in order evaluate the barriers to entry which exist for Foreign investors, and the regulations in place that are in of control exports. What is also established is the importance of the economic factors that contribute largely in attracting foreign investment or investors. To some extent India has stabilised since Independence and the economic indicators are improving. The raw materials that lie in India have played a significant role in attracting investment resulting in production efficiency. Cheap unskilled labour is another indicator which has caused much controversy outside of India with companies being accused of exploiting India’s workforce. India is still a developing country and has rapidly increasing population, many of which struggle to survive everyday, and because of this we can conclude that foreign investment is encouraged into India.

Introduction

When we discuss economies on a global scale, a frequently mentioned term is Foreign Direct Investment (FDI). FDI is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor." (www.unctad.org). It is a long-term relationship between the investor and the recipient entity.

The aim of this report is to investigate the inward movement of FDI in India. Firstly, a general country overview of India will be presented, followed by a literary review, and the three main determinants of FDI, namely:

• Policy framework

• Economic determinants

• Trade facilitation.

Literary Review

Policy framework, Economic determinants and Trade facilitation are the key determinants of attracting an inward flow of FDI for any country, and India is no exception. The literature referred to in the report is a testament to this statement.

India has seen a number of key policies and regulations being introduced during a series of economic changes. The East Asian crisis burst onto the world scene almost like a bolt from the blue, affecting many rapidly growing Southeast Asian countries like Thailand, the Rep. of Korea, Malaysia, Indonesia, and the Philippines. Their reverberations have been felt by neighbouring countries, including India in the early 1990s. This jumpstarted various policy initiatives, that progressively changed India from a restrictive regime to a liberal one. The Government of India (2001), Office of Economic Adviser, Ministry of Commerce & Industry, Handbook of Industrial Policy and Statistics, 2000,

New Delhi highlights these key economics reforms in terms of their origins, implementation, objectives as well as impact.

Other literature such as the “The Experience of Foreign Direct Investors in India” (Federation of Indian Chambers of Commerce & Industry (FICCI), 2001, April, 2001, New Delhi) form a genuine account of the affect and changes these FDI policies have had, also giving a insightful and bold critique of the many changes that are still required. The World Investment Reports have also provided accurate facts and figures and invoke the idea of the investment climate for MNEs in India.

Additionally, India’s economic determinants that established the base of inward FDI initiated from the attraction of raw materials, to cheap labour and the development of their infrastructure, are mainly emphasised in the following literature, www.indiainbusiness.nic and www.nasscom.org.

Reports have shown similar research and analysis’s that indicate current and future factors that affect India’s inward FDI and issues that investors must be aware of as specifically highlighted in the report by Pathak, Venugopal and Chandra (2000).

With regards to the concept of trade facilitation, the literature used to define “trade facilitation” is by Dr. Jayanta Roy, which is to ensure that the processes involved in moving, releasing and clearing goods is simplified. Survey undertaken by S.V.Divvaakar, 2005 show it is necessary for India, to concentrate on trade facilitation efforts on a regional level in order to attract more FDI to small and mid-sized economies that otherwise may be ignored due to their small market size. Apart from Dr. Jayanta Roy’s articles, the data used here is mostly factual and it is used to support the view that trade facilitation is an important

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