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FDI in India: An analysis on the impact of FDI in Indias Retail sector By Subhajit Ray 3 rd year student Department of HSS, IIT Kharagpur
This presentation aims to briefly discuss the critical aspects of FDI in India, present a case study on the success of reforms in the telecommunications sector, analyze both sides of the arguments currently going on regarding FDI in retail and conclude with suggestive measures on the part of the government which can eliminate the negative effects of allowing FDI in Indias retail sector.:
This presentation aims to briefly discuss the critical aspects of FDI in India, present a case study on the success of reforms in the telecommunications sector, analyze both sides of the arguments currently going on regarding FDI in retail and conclude with suggestive measures on the part of the government which can eliminate the negative effects of allowing FDI in Indias retail sector.
What is FDI?:
What is FDI? Investment made to acquire lasting interests in enterprises operating outside of the economy of the investor. Consists of a parent enterprise and foreign affiliate which together form a MNC. Eg: Hero Honda
Why FDI?:
Why FDI? No debt creation on the part of the government. Triggers technology transfer. Assists Human capital formation. Contributes to international integration by promoting exports. Increases productivity and competitiveness.
:
Improves efficiency of resources. Promotes innovation.
Drawbacks of FDI:
Drawbacks of FDI Local firms may loose business because of the oligopolistic power of foreign firms. The repatriation of profit may drain out the capital of the host country. Local population may be displaced out of their jobs if they are unable to cope with the technologically advanced foreign firms.
PowerPoint Presentation:
Aitken, et al. (1997) showed the external effect of FDI on export with example of Bangladesh, where the entry of a single Korean Multinational in garment exports led to the establishment of a number of domestic export firms, creating the countrys largest export industry. Hu and Khan (1997) attribute the spectacular growth rate of Chinese economy during 1952 to 1994 to the productivity gains largely due to market oriented reforms. A study by Xu (2000) concluded that in order to benefit from the technology transfer by the MNEs a country needs to achieve a basic minimum human capital threshold.
Equipments, Transport, Chemicals, Food Processing, Metallurgical, Drugs and Pharmaceuticals, Textiles, and Industrial Machinery as a part of reform process started in the beginning of 1990s.
PowerPoint Presentation:
37763 Year wise revised FDI Inflow since 2000-2001 with expended coverage to approach International Best Practices.
PowerPoint Presentation:
The growth of FDI inflows in India was not significant until 1991 due to the regulatory policy framework. There has been a steady build up in the actual FDI inflows in the post-liberalization period. Actual inflows have steadily increased from US $ 143.6 million in 1991 to US $ 37,763 million in 2010. the pace of FDI inflows to India has definitely been slower than some of the smaller developing countries like Indonesia, Thailand, Malaysia and Vietnam.
PowerPoint Presentation:
India had registered a declining trend of FDI inflows and the FDI- GDP ratio especially in 1998 and 2003 could be attributed to many factors, including the US sanctions imposed in the aftermath of the nuclear tests and Swadeshi movements. But since 2006 India has seen a remarkably higher growth of FDI in accordance with the general trends of the global economy with a slight dip in the year 2009-2010. Capital goods sector has more or less been bypassed by FDI. This clearly points out the tendency of foreign investment to exploit the pent up domestic demand for consumer durable goods. A gradual increase in the mergers and acquisitions during the 1990s which show a tendency of FDI inflows to acquire existing industrial assets and managerial control without actually engaging in new productive activities (Nagraj, 2006).
PowerPoint Presentation:
It is true that it is in the consumers best interest to obtain his goods and services at the lowest possible price. But collective well being should take precedence.
psychologically propel buyers to spend more than they otherwise would. The resulting growth in private consumption creates jobs. Inflation is controlled.
PowerPoint Presentation:
The tax revenue collected by the government can be used for infrastructure development. Similar negative arguments were used during the era of industrial licensing, which was meant to protect small-scale industries. India will become more integrated with regional and global economies in terms of quality standards and consumer expectations.
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Hindi and local languages as a mode of operation should be encouraged. Cooperative societies should be formed for the farmers and other agricultural suppliers to take care of their rights. The foreign retail units should be made to divest a certain percentage of their equity in the Indian financial markets. Social infrastructure like schools, colleges and hospitals should be developed to promote human capital formation
References: :
References: Economic Reforms, Foreign Direct Investment and its Economic Effects in India by Chandana Chakraborty Peter Nunnenkamp. March 2006. Indias Economic Growth and the Role of Foreign Direct Investment: By Lakhwinder Singh 2006. FDI in Indias Retail Sector More Bad than Good? By Mohan Guruswamy Kamal Sharma Jeevan Prakash Mohanty Thomas J. Korah Rethinking the linkages between foreign direct investment and development: a third world perspective By: Shashank P. Kumar Indias FDI inflows Trends and Concepts By K.S. Chalapati Rao & Biswajit Dhar Impact of liberalization on FDI structure in India. By Dr. Gulshan Kumar. Impact of foreign direct investment on Indian economy: A sectoral level analysis. By Dr Maathai K. Mathiyazhagan. Foreign Direct Investment in Post-Reform India: Likely to Work Wonders for Regional Development? By Peter Nunnenkamp and Rudi Stracke. FDI in India in the 1990s. Trends and issues. By R Nagaraj. China and India: Any difference in their FDI performances? By Wenhui Wei. June 2005 Fact sheet on FDI in India by the Planning Commission. Data on GDP growth rate from the Planning Commisiion. Wikipedia.com Planningcommission.nic.in