About Foreign Direct Investment in India:

Though India stands today as the largest democracy, its administrative as well as the
political set up has many flaws and shortcomings. The Indian system of
administration and governance is impregnated with flaws like shortages of power,
bureaucratic hassles, political uncertainty, and infrastructural deficiencies .In spite of
all these political shortcomings, India is perceived to be one of the most lucrative
grounds for investing, in the eyes of the wealthy European as well as American
investors. This is the true reason why the researches made into the sector
establishes more and more foreign investors coming to India and investing liberally
into the various sectors of the Indian economy.
Various Indian market sectors have experienced a recent progress and boom, owing
to the investment made in them as well as due to the relaxation of rules and
regulations that had been levied on the foreign direct investment in India, by the
Indian government. One of such sectors of the Indian economy, that has seen a
sudden booming phase of prosperity and sustained growth, owing to these factors is
the real estate as well as the construction business in India. It was the year of 2005,
when the Indian Central government finally realized the economic prosperity that
foreign direct investment in India would bring about. Thus, in an effort to encourage
this, the government made a crucial amendment to some of the governing laws on
the subject, in order to allow one hundred per cent foreign direct investment in India,
in the real estate and construction sector.Untill this point of time, the Indian law
permitted only the non resident Indians (NRIs ) or persons of Indian origin(PIOs) to
make foreign direct investment in India. Even these people had been levied with
many restrictions. With the upliftment of these restrictions, a host of foreign investors
and companies stormed India with their products, services and business ideas along
with their money. This money in turn helped the Indian economy to grow in volume
as well as statures
Many major industrialists and business tycoons expanded their businesses to India
with the boom of foreign direct investment in India. Some of the major foreign
investment houses, that have shown trust in the Indian economy, are Lee Kim Tah
Holdings, Salim Group from Indonesia, Edaw Ltd., from USA, Emaar Group from
Dubai, IJM, CESMA International Pvt Ltd, Ho Hup Construction Co., from Malaysia,
Evan Lim and Keppel Land from Singapore etc. Japanese and Korean firms and
businesses houses like Suzuki, Hyundai and Daichi have always trusted the
automobiles as well as the pharmaceutical sectors for foreign direct investment.
Many of the Indian sectors have thus benefited from these foreign direct
investments, and in turn given lucrative returns to the investors as well. This is the
reason why most of the investors keep looking towards India as a venue for
investment.
The future prospects of these foreign investors in India look a bit gloomy at the
moment due to the global meltdown and recession that the world is facing. But as
the economies start to recover, the boom in the foreign direct investment segment is
bound to return, and that t with a big bang.
The Indian economy has been booming ever since India came out of the
shackles of imperialism and emerged as a politically, socially as well as
financially independent nation. Although India attained its freedom more
than about sixty years ago, the emergence of the Indian economy on the
global scene has been a rather recent development. This is because of the
realization of the true economic growth potential of India, by the foreign
investors as well as business houses. Till about the recent times. India
continued to be a whole soul agricultural economy, which had been
impregnated with various types of beaurocracy, exploitation and corruption.
In spite of this, the westerners saw tremendous potential in India to develop
as an economically strong adobe for investment and ploughing in of cash in
order to start off a new venture. But till recently, there were various
jurisdictions prevalent in the code of law in India, that prevented the full
strength inflow of foreign direct investment in India. But fortunately for all,
the Indian government was quick to realize the actual potential embattled in
the Indian economy and what was holding it back. Thus finally in the year
2005, the Indian central government passed a jurisdiction allowing a cent
percent foreign direct investment into the Indian economy, in various
sectors.
This was one of the major steps taken into the direction and it opened the
doors for a number of foreign investors to come to India and plough in their
money into various segments of the market. The sectors of the Indian
economy to benefit the most from this were trelecom, automobiles, retail,
real estate and construction bussiness.Of lately, other sectors such as
pharmaceuticals as well as chemicals have also seen the magic of foreign
direct investment. There are still some sectors like arms and ammunitions,
transport and railways etc, which are still prohibited to entertain any type of
foreign investment.
Apart from the government laws and jurisdictions, there are various other
factors behind the success of foreign direct investment initiatives in the
country. The most crucial factors include the tremendous support base
provided by India to aid the success of the projects laid out by these foreign
investors. The unending supplies of electricity and water services and
facilities are one of the most crucial components of these. This has been
possible as India is blessed by nature with a host of ever flowing rivers,
which are like the lifeline to every activity that takes place in India. Apart
from this, various types of raw material desired by these manufacturing
projects such as coal, metals, minerals etc. are available abundantly in
India.Thus, the instant availability of these raw materials is crucial in saving
any kinds of delays and cutting down coss.Another favorable factor in India
is the availability of a large workforce, which majorly dwells in villages and
rural areas of the country.
All these factors and more can be distinctly recognized as the various
factors that have led to the success of the foreign direct investment
initiatives in the country.


Major Pullbacks of Foreign Direct Investment In India:

Although India attained its freedom more than sixty years ago, the emergence of the
Indian economy on the global scene has been a rather recent development. This is
because of the realization of the true economic growth potential of India, by the
foreign investors as well as business houses. Before this as well the concept f
foreign investment in India was not particularly unknown. Since the ancient times,
India has been serving as a trading ground for agricultural produce, spices, minerals
and natural resource, etc.This was the reason why many of the traders and
merchants from all over the world, regularly came to India to invest in to the ever
shining glory of the ever booming Indian economy .They aimed at striking out a
lucrative deal with the local authorities as well as traders and generate impressive
returns.. This saw merchants from countries like Britain, France, Denmark, Spain,
Iran etc coming to India and setting up a base here. Even the British East India
Company, who ruled over India for four hundred years, came to India as a trading
company.Thus, India has been a famous adobe for investment of foreign money
since its historical era and the foreign direct investments of today, exploit the same
factors of India, as did the merchants and traders in the past.

Having said that the new age foreign investors perceive India as a very lucrative
revenue generating ground and a place where they can effectively prosper a
business, India could not develop itself as a prominent adobe for investment by
foreign investors till the very recent times. One of the major reasons for this was that
directly after the independence from the British rule, India fell into the shackles of
war as well as political instability. It waged three prominent wars with its neighboring
country Pakistan over a period of sixty years. There were also some tumultuous
times within the country where the security conditions lapsed as a result of riots and
battles against naxalites.This in turn discouraged any foreign investors to come to
India with their money due to severe security concerns.
Apart from this, the post-independence period in India saw it falling into a socialistic,
rigid economical ideology. This discouraged any external interference or
collaborations, even on the business front. During all these times, the major
population of India dwelled in the villages and small towns. As a result of this they
were not very financially sound and thus their spending power was not very much.
As a result the foreign investors were not very keen to market products in a country
were most of the people could not afford it. Another reason that prevented the setting
up of the base of foreign investors in India was the stringent code of laws that placed
a check on the amount of money that could be invested into the Indian markets. The
frame of law also placed a check on the origin of the foreign investors- only investors
of Indian origin had the privilege to invest in the country. All these factors kept India
away from the boom and the wave of prosperity that foreign direct investment would
result into.