Foreign Investment In India Essays

To understand what FDI is we should first know the full form for FDI. FDI means Foreign Direct Investment. FDI is a process in which a company invests in another country where it does not possesses any business. FDI is usually done by the companies to expand its business and profits.

FDI in retail sector is booming now days as we all can see that more and more companies are coming to India to open its retail stores or doing joint ventures with host country companies. FDI has become a major area of investment by foreign companies to invest and earn profit. Companies try to come alone or with some other company as in India 100% is allowed only in single brand retail whereas in Multi Brand retail only 51% is being allowed for a company to invest in the retail sector.FDI has both positive and negative effects on the economy. In FDI the company tries to open its store in various areas in the countries alone or with joint venture with the other companies of home or host country. FDI is very important for a country as it helps in employment generation and economic growth. In India FDI was not allowed till 1991 but after new industrial policy the gates are being opened for the foreign companies to enter in to India. The main reason behind boom in FDI is Mergers & Acquisitions and Globalization in the world. In India it is seen that FDI is increasing day by day and it helps in increasing the economy of the country. FDI is of various types in which companies come in the country by opening it’s wholly owned stores or by doing joint ventures with the home country Like Carrefour, Wal-Mart etc had opened his wholesale cash and carry stores in India in which Wal-Mart store named as BEST PRICE and will open 50-60 stores in next 5 years down the line. Their major focus is on tier -2 and tier-3 cities as they see much business in these cities. There are various other companies which are coming in India for expanding their business of retail sector. According to a survey Indian Retail industry will grow at the rate of 10% in the coming years.

The other side of FDI in retail sector is increasing competition between local sellers due to this competition the local seller have to increase it quality with the competitive price strategy which they use for selling the product. FDI in retail sector is making the local seller to compete with them otherwise move out from the competitive league. FDI also make the price of the product so competitive that eventually it helps the consumer to get that product in fewer prices.

We can say that FDI has both positive as well as negative sides and it totally depend on thinking of a person. I think that FDI in retail sector is a good opportunity for Indian retailers to joint with them and try to overcome them so that consumer will get the best out of it whereas it provides opportunity to various unemployed person in the country.

CHIRAG TREHAN

MEERUT (U.P.)

My comments

  • Bad grammar
  • Lack of flow of ideas and facts
  • Marks - 3.5/10

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India has a long way to climb up the foreign direct investment (FDI) ladder โ€“ Essay

India has a long way to climb up the foreign direct investment (FDI) ladder. Despite emerging as a major destination for outsourcing in IT-related services, India is unlikely to catch up with its neighbour China in attracting FDI funds to become a major destination for manufacturing various products.

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Last year, the Middle Kingdom (China) secured nearly $54 billion replacing the United State as the larger recipient for FDI flows.

In sharp contrast, India secured $4.3 billion last year, an increase of $900 million or 24 per cent rise over the previous year 2002. Countries in South Asia such as India, Pakistan, Bangladesh, Sri Lanka, and others received $6.1 billion last year up from $4.5 billion in 2002.

FDI flows:

The UNCTAD’s World Investment Report 2004 (WIR) released last week graphically captured how different countries of the UN-family are performing in soaking up FDI flows. The WIR has become a barometer to judge how countries are performing in attracting FDI funds as well as how they are investing outside their countries.

FDI that includes both merges and amalgamations (M&A) as well as green-field (new physical) investments is a major phenomenon of globalization. In fact, success of different countries in the era of globalization that began on a pronounced scale since the fall of Berlin wall in 1989 is judged by FDI flows into their respective countries.

With the size of FDI cake being limited and dependent more on the overall international economic climate, it is understandable that there is a race to the bottom in attracting FDI flows. After the collapse of stock markets world over, particularly in US, it is somewhat natural that FDI fell down sharply.

Services:

Against this backdrop, India’s performance on the face of it might look impressive last year. At a time, when services came to dominate global FDI movements, India has definitely made significant progress in FDI related to the off shoring of services. UNCTAD’s chief investment analyst James X Zhan said that India’s performance is “remarkable” in attracting investments, arguing that it is becoming an important global point.

Thanks to breathtaking developments in the communications and information technology sectors, most off shored services to date are concentrated in few countries, argued James X Zhan.

More importantly, the report dispels the view very strongly that there is any adverse or dangerous fallout from liberalisation of services at a breakneck speed.

Carlos Fortin, UNCTAD’s top official said that outsourcing or off shoring involved some loss of jobs but such a phenomenon is part of global trade since last two hundred years.

Most off shored services are grabbed by Ireland, India, Canada, and Israel in that order. These four countries accounted for over 71 per cent of the total market for off shored services in 2001. The off shored services largely include software development and other IT services.

Citing various reports prepared by global constancy firms, the FIR says that India topped the 25 bading international destinations for off shoring services. China, Malaysia, Czech Republic and Singapore are becoming the major competitors to India.

UNCTAD argues that FDI plays a key role in off shoring although it is difficult to quantify. FDI affects off shoring through captive off shoring and when specialised service providers set up foreign affiliates to serve foreign clients. The report points that setting up such foreign affiliates creates jobs in host countries; they typically do not generate large capital flows. Hence, they don’t show up in FDI statistics.

However, the share of developing countries, particularly India, in FDI projects related to services off shoring has increased from 37 per cent in 2002 to 51 per cent in 2003. Their share in the number of jobs created reached 57 per cent in 2003.

More importantly, FDI in IT and IT enabled services in India during 1998-2002 comprised almost 90 per cent Greenfield investment, 10 per cent joint ventures and less than one per cent acquisitions. India’s performance is mixed in four categories of services such as shared service centers, call centres. Regional Headquarters and IT related services.

Despite these changes, India’s rank by Inward FDI performance Index during 2001-2003 has moved only to 114th position from 137th. Even countries such as Pakistan are well above India in Inward FDI Performance Index, 2001- 2003.

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