ICOQM-10

June 28-30, 2011

An Updates of Issues, Challenges and Opportunities in FDI in India

Prithvi Raj Sanyal Nidhi Singh Sourabh Tripathi prithvirajsanyal@yahoo.co.in nsingh141@rediffmail.com stripathimba@gmail.com Dev Bhoomi Group of Institutions, Dehradun
In the beginning of liberalization when India was facing the financial crises for meeting the external commitments. At one time during the Prime minister Chandra Sakher government India had to pledge its gold before World Bank to repay the foreign debts as India had only $ 1 billion foreign exchange reserves, at the same time, the immediate external payment was more than $ 25 billion. Therefore India was bound to opt for liberal economic policy for the inflow and outflow of foreign investment and depreciation of Indian rupees by 300% in comparison of dollar from rupees 8 to rupees 28 per dollar. By which the foreign investors started attracted and investing their funds in India as the India had and has potential for the growth and diversification of business, since then the India has made remarkable progress in the field of foreign direct Investment but there are lot many challenges and issues needs to be resolve to promote and attract foreign direct investment. These issues and challenges are as mentioned in the papers are-Restrictive FDI regime, Lack of clear cut and transparent sectoral policies for FDI, High tariff rates by international standards, Lack of decision-making authority with the state governments, Limited scale of export processing zones, No liberalization in exit barriers, Stringent labour laws, Financial sector reforms, High corporate tax rates, Fluctuating Exchange rates, Indecisive Government and political Instability. In this paper we have tried to update the latest and the possible conclusion for the rationalization of foreign direct investment. Keywords: Challenges and Opportunities, Liberalization, Financial Reforms, Foreign Direct Investment

1. Introduction
Foreign Direct Investment take place when an investor based in one country acquires asset in another country in this process, the company investing in the host country also transfers assets such as technology, management and marketing. In addition to this the investing company also get chances of power to exercise control over decision making in a foreign land enterprise to the extent of which it held equity control such investment could also be in the form of reinvestment of earning in the shape of retained earnings by the host countrys enterprises that also strengthen the control o foreign investors FDI can also be in the form of equity debenture or bond in the Indian companies by foreign investors, it is channelized in the form of direct foreign contribution to the equity capital of company and is akin to domestic equity invested by the Indian shareholders of the companies the government of India has established high powered foreign investment promotion board to provide for single window approval channels for the inflow of FDI and many restrictions on the inflow of foreign capital have been withdrawn during the recent past which is the sign of encouragement for foreign investors. Before 1991, the Indian financial system was isolated from the international financial markets. Indian companies could only access the Indian capital markets that is their sources of finance were restricted with in India .After the economic liberalization, the openness was introduced in the Indian financial system and option of global market was opened for Indian business entrepreneur they can tap international sources for both debt and equity the main market instruments used by the Indian companies are global depository receipts(GDR) and American Depository Receipts (ADR) .International finance also comes in the form of foreign direct investment (FDI) under this source direct equity contribution by MNC,s are made to expand their operation beyond their national boundaries in the form of new enterprises as a branch or as subsidiary, expansion of overseas branch or subsidiary and acquisition of an over seas business and tremendous change has occurred in the Indian financial system with regard to its integration with the global financial markets. There is an increasing trends towards global capital markets and similar efforts were made to invite international investment to India. Since the inception of economic and financial reforms of 1991, the FDI inflow in India is increasing, however India has vast potential for absorbing greater flow in the coming years. Many efforts are being made to attract greater in flow of FDI in the country by taking several actions both on policy and implementation front FIPB has been shifted to the department of economic affairs under the ministry of finance and company affairs with more power and freedom more over the matters relating to FDI policy and its promotion and facilitation as also 234

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promotion and facilitation of investment by NRI and overseas corporate bodies will continue to be handled by this department as the application form for carrying on business (COB) licenses has been revised, liberal promotion on the merit and proper monitoring scheme has been gear up by the concern ministry the basic requirement of foreign investing community in making their investment decision is availability of timely and reliable information about policies and procedures governing FDI in India time and again has often provided to them. The different factors like Rate of interest, speculation, profitability, cost of production, government policies economic conditions, political stability, resources, preference of investors, cross border M&A, portfolio investment, FII, security of life and property and market sentiments are to be looked in order to attract FDI into country. Portfolio equity flows to developing countries was rising sharply from last two decade which is point of focus and fact is this that it is very small share of total international portfolio investment flows but small share of total investment by the developed countries portfolio investment would amount to large chunk of investment in the developing country markets like India has high sensitivity and volatility of investment. In fact foreign investing community have been properly attracted and positive result are flowing in the investment market, to know the exact impact of FDI on the overall development of India on sector wise this research is thrust upon for which the researcher will review existing literature and facts and figures of concern ministry/dept. and institutions to draw the exact conclusion.

2. Review of Literature
As the third-largest economy in the world in PPP terms, India is a preferred destination for foreign direct investments (FDI); India has strengths in telecommunication, information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery. Despite a surge in foreign investments, rigid FDI policies resulted in a significant hindrance. However, due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region. India has a large pool of skilled managerial and technical expertise. The size of the middle-class population stands at 300 million and represents a growing consumer market. India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. In March 2005, the government amended the rules to allow 100 % FDI in the construction business. This automatic route has been permitted in townships, housing, built-up infrastructure and construction development projects including housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, and city- and regional-level infrastructure. A number of changes were approved on the FDI policy to remove the caps in most sectors. Fields which require relaxation in FDI restrictions include civil aviation, construction development, industrial parks, petroleum and natural gas, commodity exchanges, credit-information services and mining. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing. FDI inflows into India reached a record $19.5 billion in fiscal year 2006-07 (April-March), according to the government's Secretariat for Industrial Assistance. This was more than double the total of US$7.8bn in the previous fiscal year. The FDI inflow for 2007-08 has been reported as $24 billion and for 2008-09, it is expected to be above $35 billion. A critical factor in determining India's continued economic growth and realizing the potential to be an economic superpower is going to depend on how the government can create incentives for FDI flow across a large number of sectors in India. Although a large portion of the FDI flows has been directed towards developed countries, the developing countries share has increased significantly during the last decade. The winners here are Latin America and Asia while Africa only receives moderate amounts of FDI. In Latin America it is Argentina, Brazil, Chile and Mexico that receive the largest amount of FDI (Ramirez, 2000). India is no exception when it comes to the increase in FDI inward flows. According to the government's Secretariat for Industrial Assistance, FDI inflows into India reached a record US$19.5bn in fiscal year 2006/07 (April-March). This was more than double the total of US$7.8bn in the previous fiscal year. Between April and September 2007, FDI inflows were US$ 8.2 bn. Many studies on whether or not FDI affect economic growth have been done through the years. These studies all come to varied conclusions. Some find that FDI indeed affect the economic growth while others find no such connection. The earlier studies focus on country case studies and industry level cross sectional studies. Overall, they find that there is a positive correlation between average value added per worker and the productivity of a MNE. Later studies gave up on country case studies and instead shifted the focus to firm level panel data. Typical for these studies is that the majority find no effect from FDI on economic growth. Moreover they find negative spill over effects from MNEs in developing countries while positive spill over effects only are found in developed countries. Since older studies are found inadequate, more recent studies have adopted another 235

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approach. These argue that spill over should be thought of as exchanges between different industries which mean that focus should shift to vertical (inter-industry) externalities. This refers to the contacts established between domestic suppliers and the foreign firms (Alfaro et al, 2006). The Indian economy is diverse and encompasses agriculture, handicrafts, manufacturing, textile, and a multitude of services. Although two-thirds of the Indian workforce still earns their livelihood directly or indirectly through agriculture, service sector is a growing one and are play an increasingly important role of India's economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global (multinational) companies for the outsourcing of their customer services and technical support. India is a major exporter of highly talented workforce in software and financial services, and software engineering. India adopted a socialistinspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since the early nineties, India has gradually opened up its markets through economic reforms by reducing government controls on foreign investment. The privatization of publicly owned industries and the opening up of some sectors to private and foreign investors has proceeded slowly amid political debate. The question that begs for an elaboration is that is high growth and inflows of FDI solve structural imbalance of Indian economy and will it succeed in improving the lot of bottom section of the Indian economy, which are living in abysmally poor socio-economic conditions in the countryside. The employment elasticity in the agriculture and industrial sector has gone down in the post-reform period, therefore, the creation of employment opportunities will be a gigantic task for the policy makers. FDI has come in the most capital-intensive sectors; therefore, the required employment opportunities could not be created especially for the manual and the semi skilled labour. High skilled workforce gained substantially. That is why high growth is called urban centric and thus has developed a wedge between the urban and rural economy. There is urgent need to fill this void. The process of Policymaking has matured in the democratic Indian polity since the independence. It is thus predicted that the growing problems will receive mature response and policy will be articulated in such a way to use FDI the way China has used to enhance economic growth while taking more and more investment to industrialize the rural sector of the Indian economy. India's recently liberalised FDI policy permits up to a 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and FDI. The upward moving growth curve of the real-estate sector owes some credit to a booming economy and liberalized FDI regime. A number of changes were approved on the FDI policy to remove the cap in most of the sectors. Restrictions will be relaxed in sectors as diverse as civil aviation, construction development, industrial parks, commodity exchanges, petroleum and natural gas, creditinformation services, Mining and so on. There is no doubt about the fact that there has been a worldwide stir about foreign direct investment in India. India's growth rate of 8% certainly owes a lot to foreign equity capital and foreign direct investment. Here are the highlights of the latest trend figures concerned with FDI in India: Increase in total FDI: 46.8% Rise in foreign equity: 36% Reinvested foreign earnings and other capital: $3.2 billion Total FDI earnings (inward) in Apr-Jan 2005-06: $5.7 billion Total FDI earnings (outward) increase: 2000-01: $757 million 2004-05: $2.4 billion In the backdrop of this flourishing Indian economy The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has projected India to double its GDP reaching a phenomenal USD 1100 billion from present USD 550 billion by 2010. Why do you think so? Well statistics also say that an average Indian will be growing richer as per capita income rises from USD 600 per annum to USD 1200 per annum by 2010. The impact of FDI on economic growth in a country depends on the degree of development. The investment development path (IDP) suggests five stages that a country goes through and which affect the level of investment. During the first stage a country is considered to be almost unable to attract inward direct investment. This is the case due to low per capita income, underdeveloped economic systems and governmental policies, poor infrastructure and communication, and above all, a labour force with low human capital. The few direct investments made are mainly in the labour-intensive manufacturing and primary sector like agriculture. In the second stage, inward direct investment starts to rise. The investments are still mostly located in natural resources and primary commodities. In this stage, the host government is beginning to change policies in order to stimulate FDI. The domestic firms begin to move their production towards semi-skilled and knowledgeintensive consumer 8 goods. The third stage is characterized by rising domestic income which causes an increase in demand for high quality goods, partly enhanced by an increased level of competition among firms. The rising incomes cause a decrease in growth of inward direct investment and an increase in the growth of outward direct investment towards countries with lower levels of IDP. The competition between domestic and 236

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foreign firms increases as well when the domestic firms acquire competitive advantages. The enlarged market and increased innovation will enable economies of scale and encourage technology-intensive manufacturing. When the stock of outward direct investment exceeds the stock of inward direct investment, the country has reached the fourth level. The domestic firms can only compete with foreign firms in sectors where they have a competitive advantage. Instead they invest abroad in markets where the labour is cheaper. In the domestic market the capital-intensive production increases in turn. The fifth stage characterizes by a continuous increase in outward and inward direct investment. This is the stage where advanced industrial nations find themselves. The importance of MNEs is clear here. The domestic supply of natural resources is of less importance and instead the ability to exploit markets in other countries is significant (Dunning and Narula, 1996). Government of India accepts the key role of Foreign Direct Investment (FDI) in economic development not only as an addition to domestic capital but also as an important source of technology and global best practices. The Government of India has put in place a liberal and Transparent FDI policy. FDI up to 100% is allowed under the automatic route in most sectors/activities. FDI policy in India is reckoned to be among the most liberal in emerging economies. FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors including the services sector under automatic route. FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI. Foreign direct investment (FDI) has become an integral part of national development strategies for almost all the nations globally. Its global popularity and positive output in augmenting of domestic capital, productivity and employment; has made it an indispensable tool for initiating economic growth for countries.

3. Major Issues and Challenges to Larger FDI Inflows in India

In addition to India's poor performance in terms of competitiveness, quality of infrastructure, and skills and productivity of labour, there are several other factors that make India a far less attractive ground for direct investment than the potential she has. Given that India has a huge domestic market and a fast growing one, there is every reason to believe that with continued reforms that improve institutions and economic policies, and thereby create an environment conducive for private investment and economic growth that substantially large volumes of FDI will flow to India. We list some of the major determinants below: Restrictive FDI Regime The FDI regime in India is still quite restrictive. As a consequence, with regard to cross-border ventures, India ranks 57 in the GCR 1999. Foreign ownership of between 51 and 100 percent of equity still requires a long procedure of governmental approval baring few sectors. In our view, there does not seem to be any justification for continuing with this rule. This rule should be scrapped in favour of automatic approval for 100 % foreign ownership except on a small list of sectors that may continue to require government authorization. The banking sector, for example, would be an area where India would like to negotiate reciprocal investment rights. Besides, the government also needs to ease the restrictions on FDI outflows by non-financial Indian enterprises so as to allow these enterprises to enter into joint ventures and FDI arrangements in other countries. Further deregulation of FDI in industry and simplification of FDI procedures in infrastructure is called for. Lack of Clear Cut and Transparent Sectoral Policies for FDI Expeditious translation of approved FDI into actual investment would require more transparent sectoral policies, and a drastic reduction in time-consuming red-tapism and unauthorised delays by the governmental officials. High Tariff Rates by International Standards India's tariff rates are still among the highest in the world, and continue to block India's attractiveness as an export platform for labour-intensive manufacturing production. On tariffs and quotas, India is ranked 52 in the 1999 GCR, and on average tariff rate, India is ranked 59 out of 59 countries being ranked. Much greater openness is required which among other things would include further reductions of tariff rates to averages in East Asia (between zero and 20 percent). Most importantly, tariff rates on imported capital goods used for export, and on imported inputs into export production, should be duty free, as has been true for decades in the successful exporting countries of East Asia. Lack of Decision-making Authority with the State Governments The reform process so far has mainly concentrated at the central level. India has yet to free up its state governments sufficiently so that they can add much greater dynamism to the reforms. In most key infrastructure areas, the central government remains in control or at least with veto over state actions. Greater freedom to the states will help foster greater competition among themselves. The state governments in India need to be viewed as potential agents of rapid and salutary change. Brazil, China, and Russia are examples where regional governments take the lead in pushing reforms and prompting further actions by the central government. In Brazil, it is Sao Paulo and Minais Gerais which are the reform leaders at the regional level; in China, it is the coastal provinces, and the provinces farthest from 237

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Beijing, in the lead; in Russia, reform leaders in Nizhny Novgorod and in the Russian Far East have been major spurs to reforms at the central level. Limited Scale of Export Processing Zones The very modest contributions of India's export processing zones to attracting FDI and overall export development call for a revision of policy. India's export processing zones have lacked dynamism because of several reasons, such as their relatively limited scale; the Government's general ambivalence about attracting FDI; the unclear and changing incentive packages attached to the zones; and the power of the central government in the regulation of the zones, in comparison with the major responsibility of local and provincial government in China. Ironically, while India established her first EPZ in 1965 compared with China's initial efforts in 1980, the Indian EPZs never seemed to take off -- either in attracting investment or in promoting exports. No Liberalization in Exit Barriers While the reforms implemented so far have helped remove the entry barriers, the liberalization of exit barriers has yet to take place. In our view, this is a major deterrent to large volumes of FDI flowing to India. An exit policy needs to be formulated such that firms can enter and exit freely from the market. While it would be incorrect to ignore the need and potential merit of certain safeguards, it is also important to recognize that safeguards if wrongly designed and/or poorly enforced would turn into barriers that may adversely affect the health of the firm. The regulatory framework, which is in place, does not allow the firms to undertake restructuring. Stringent Labour Laws Large firms in India are not allowed to retrench or layoff any workers, or close down the unit without the permission of the state government. While the law was enacted with a view to monitor unfair retrenchment and layoff, in effect it has turned out to be a provision for job security in privately owned large firms. This is very much in line with the job security provided to public sector employees. Most importantly, the continuing barrier to the dismissal of unwanted workers in Indian establishments with 100 or more employees paralyzes firms in hiring new workers. With regard to labour regulations and hiring and firing practices, India is ranked 55 and 56 respectively in the GCR 1999. Labour-intensive manufacturing exports require competitive and flexible enterprises that can vary their employment according to changes in market demand and changes in technology, so India remains an unattractive base for such production in part because of the continuing obstacles to flexible management of the labour force. Financial Sector Reforms Reform of India's financial sector is crucial for large FDI flows into India. However, only some partial steps have been undertaken and these are by no means going to make any meaningful changes to the existing system. India's banking and insurance companies were nationalized more than two decades ago. While a number of countries had undertaken such actions in the 1970s and early 1980s, for instance Mexico, France, and Chile, however, they have almost completely reversed this policy by now. Be that as it may, India still continues to rely on a state-owned, state-run banking system and the expect has had highly adverse results, both in terms of availability of funds for investment and a negligible presence of foreign banks and least presence of foreign insurance companies in the country. High Corporate Tax Rates Corporate tax rates in East Asia are generally in the range of 15 to 30 %, compared with a rate of 48 % for foreign companies in India. High corporate tax rate is definitely a major disincentive to foreign corporate investment in India. With respect to tax evasion, India is ranked 48th in the GCR 1999. Fluctuating Exchange Rates The exchange rates of different currencies are very much fluctuating time and again which poses problem for the prospective investor in the country. The past trends were not satisfactory, hopes to improve in future No doubt the fluctuation were temporary but it has affected the inflow of FDI to a large Extent in India and other Asian countries. Indecisive Government and Political Instability There was to many anomalies on the government side during past two decade which is still affecting the direct inflow of FDI in India such as mismanagement and oppression by the different company, which affect the image of the country and also deject the prospective investor, who are very much conscious about safety and constant return on their investment.

4. Update and Analysis of FDI in India

Fact Sheet on Foreign Direct Investment (FDI) From August 1991 to August 2010 238

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FDI Equity Inflows

Table 1 Cumulative FDI Flows into India (1991-2010) CUMULATIVE AMOUNT OF FDI FLOWS INTO INDIA (from April 2000 to August 2010) (Equity inflows + including data on 'Re-invested earnings' & 'Other capital', which is available from April 2000 onwards. These are the estimates on an average basis, based upon data for the previous two years, published by RBI in their Monthly Bulletin) CUMULATIVE AMOUNT OF FDI EQUITY INFLOWS (from August 1991 to August 2010)

1.

US$ 175,941 million

2.

Rs. 6,03,119 crore

US$ 1,37,960 million

Table 2 FDI Equity Inflows (with Company-wise Details) Available from 2000-2010 AMOUNT OF FDI EQUITY INFLOWS (from April 2000 to August 2010) (excluding, amount remitted through RBI's-NRI Schemes & advances pending for issue of shares) FDI inflows do not include data on 'Re-invested earnings' & 'Other capital', as company-wise details are not maintained by RBI. AMOUNT OF FDI EQUITY INFLOWS DURING FINANCIAL YEAR 2010-11 (from April 2010 to August 2010)

1.

Rs. 5,33,019 crore

US$ 1,19,177 million

2.

Rs.40,816 crore

US$ 8,887 million

Table 3 FDI Equity Inflows (Month-wise) during the Financial Year 2010-11 Financial Year 2010-11 (April-March) 1. 2. 3. 4. 5. April 2010 May 2010 June 2010 July 2010 August 2010 Amount of FDI inflows* (In Rs. Crore) 9,697 10,135 6,429 8,359 6,196 40,816 66,857 ( - ) 39 % (In US$ mn) 2,179 2,213 1,380 1,785 1,330 8,887 13,760 ( - ) 35 %

2010-11 (up to August 2010) # 2009-10 (up to August 2009) %age growth over last year

Table 4 Share of Top Investing Countries FDI Equity Inflows (Financial Years) Amount Rupees in Crores (US $ in Million) 2008-09 (April-March) 50899 (11229) 15727 (3454) 8002 (1802) 3840 (864) 3922 (883) 1889 (405) 5983 (1287) 2750 (629) 2098 (467) 1133 (257) 123025 (27331) 2009-10 (April-March) 49633 (10376) 11295 (2379) 9230 (1943) 3094 (657) 4283 (899) 5670 (1183) 7728 (1627) 2980 (626) 1437 (303) 3017 (629) 123120 (25834) 2010-11 (AprilAugust) 3461 (2924) 4934 (1085) 2944 (636) 1263 (247) 2213 (481) 2330 (515) 1437 (310) 315 (69) 1178 (254) 1042 (224) 40816 (8887) Cumulative Inflows (April '00-August '10) 224367 (50164) 50080 (11275) 40134 (8914) 27261 (6158) 22339 (4968) 19225 (4230) 19214 (4209) 12783 (2868) 8097 (1784) 8065 (1773) 542514 (121261) %age to Total Inflows (in Terms of US $) 42% 9% 7% 5% 4% 4% 4% 2% 2% 1% 78%

Ranks

Country

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Mauritius Singapore U.S.A. U.K. Netherlands Japan Cyprus Germany France U.A.E.

Total FDI Inflows

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Table 5 Sector attracting Highest FDI Equity Inflows Amount Rupees in Crores (US $ in Millions) 2008-09 (AprilMarch) 2009-10 (AprilMarch) 2010-11 (AprilAugust) Cumulative Inflows (April '00-August '10) %age to Total Inflows (in Terms of US $)

Ranks

Sector

1.

Service Sector (Financial & Nonfinancial) Computer Hardware & Software Telecomm Housing & Real Estate Construction Activity Power Automobile Metallurgical Petroleum and Natural Gas Chemicals

28516 (6138)

20776 (4353)

5793 (1260)

111023 (24862)

21%

2. 3. 4. 5. 6. 7. 8. 9. 10.

7329 (1677) 11727 (2558) 12621 (2801) 8792 (2028) 4382 (985) 5212 (1152) 4157 (961) 1931 (412) 3427 (749)

4351 (919) 12338 (2554) 13586 (2844) 13516 (2862) 6908 (1437) 5754 (1208) 1935 (407) 1328 (272) 1707 (362)

2090 (458) 4789 (1054) 2492 (539) 1352 (294) 3121 (677) 519(114) 2807 (613) 987 (218) 675 (146)

45937 (10330) 45495 (9985) 39861 (8895) 37045 (8347) 24040 (5305) 21341 (4710) 16247 (3743) 12491 (2883) 11949 (2642)

9% 8% 7% 7% 4% 4% 3% 2% 2%

Analysis As per the available facts from the cumulative FDI inflow up to 2010 was 137,960 $ in term of rupees it was 6,03,119 crore in the form of equity. The active liberal government policy which was Corley focus on investment promotion for this the government has established FIPB (Foreign Investment Promotion Board) under the department of DIPP (Department of Investment Promotion Policy). The company wise detail of FDI inflow as given in table-2 is: 119,177 US million $ in terms of rupees it was 53309 crores. The FDI inflow during the year 2010-11 was 8887 million $ and in terms of rupees it was 40816 crores. The month wise detail of inflow are as shown in table-3 Up to august 2010 during the month of April, May ,June , July, August 2010 it was 2179, 2213, 1380, 1785, 1330 respectively US million $. During the year in term of rupees it was 9697, 10135, 6419, 8359, 6196 respectively. During the past one year 2009 august it was 13,760 million $ and in terms of rupees it was 66857 crore rupees, in fact there was 35% decline in terms of US $ and 39% in term of rupees, all this happen because of recessionary trends prevailed and their consequential effect in the international investment market. The month wise detail during the first eight months of 2010 there was total FDI inflow 19937US million $ and in terms of rupees it was 97555 crore rupees mean there while 31% decline in terms of US $ and 35% in terms of Rupees. The country wise inflow of FDI of 3 years that is 2008-09, 2009-10 and 2010-11 with cumulative figure are as table 3 & 4: Mauritius 50,899; 49633; 3461 and 224367 crore rupees respectively, Singapore 157127l; 11295; 4934 and 50080 crore rupees respectively, USA 8002; 9230; 2944 and 40134 crore rupees respectively, U.K. 3840; 3094; 1236 and 27261 crore rupees respectively, Netherlands 3922; 4283; 2213 and 22339 crore rupees respectively, Japan 1889; 5670; 2330 and 19225 crore rupees respectively, Cyprus 5983; 7728; 1437 and 1914 crore rupees respectively, Germany 2750; 2980; 315 and 12783 crore rupees respectively, France 2098; 1437; 1178 and 8097 crore rupees respectively, and in U.A.E. 1133; 3017; 1042 and 8065 crore rupees respectively, the cumulative figure in terms of US million $ of all the years for Mauritius, Singapore, USA, U.K, Netherlands, Japan, Cyprus, Germany, France and U.A.E are 11275, 8914, 6158, 4968, 4230, 4209, 2868, 1784, 1737 respectively with the total of all 121261 which was in terms of percentage 42%, 9%, 7%, 5%, 4%, 4%, 4%, 2%, 2% and 1% respectively with the total of 78% of cumulative percentage. Sector wise percentage three cumulative figures as per table-5 for top ten sectors. These sectors are service sector, computer hardware, Telecomm, Housing and real estate, construction, Power, Automobile, Metallurgical, Petroleum and Natural Gas, Chemical and other sectors 21%, 9%, 8%, 7%, 7%, 4%, 4%, 3%, 2%, 2% and 33% respectively.

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Conclusion The performance of foreign direct investment till date is round about the satisfactory level baring the certain issues and challenges. today we have more than $303.48 billion as a foreign exchange reserves and above foreign debts are around about $297.5 billion which we can further improves through export promotions , liberal opportunities of investment for foreign investors in restricted sectors such as- Insurance, banking, retails etc. No doubt the opening of the investment opportunities for the foreign investor will make the Indian industries more competitive and some of them may have to struggle for the survivals such as small retailers and shop keepers. If 100% FDI is permitted in retail sector but the classic employment opportunities will rise and youth will find more competitive jobs in retail sectors with the coming of foreign companies. The better quality services will be provided to the customers at their door steps. The possibilities of cheating and the deception by the local retailer will be minimize and Indias foreign exchange reserves will furthered improves the image of country will further put to rising side as if the above mention lacuna and challenges is removed as the every dark side has the brighter side also things and results depends upon the managers and regulator of the country.

5. References
1. Russell A. Jackson, FDI uses predictive modelling to plan smoother operational, structural changes, http://www.simio.com/company/press-center/news/FDI-Uses-Predictive-Modeling.pdf. 2. Singh Diaram Ramjee, The determinants of FDI in Small developing Nation states: Anexploratory, http://www.centralbank.org.bb/WEBCBB.nsf/vwPublications/054ABA5785981F66042577F2005E7C B9/$FILE/The%20Determinants%20of%20FDI%20in%20Small%20Developing%20Nation%20States %20an%20Exploratory%20Study.pdf. 3. Khan H. Ashfaque and Kim Yun-Hwan, Foreign Direct Investment in Pakistan: Policy, Issues and Operational Implications, http://www.adb.org/Documents/EDRC/Reports/ER066.pdf. 4. Bajpai Nirupam and Sachs D. Jeffrey, Foreign Direct Investment in India: Issues and Problems, http://www.earth.columbia.edu/sitefiles/file/about/director/pubs/759.pdf. 5. OECD India Investment roundtable, Opportunities and Polocy Changes in India, http://www.oecd.org/dataoecd/8/17/33806126.pdf. 6. Douglas H. Brooks, Emma Xiaoqin Fan, Lea R. Sumulong, Economics and Research Department: ERD Working Paper Series No.38, http://www.abd.org/economics. 7. Opportunities and Policies challenges for Investment in India by DIPP, http://dipp.nic.in/oecd_backpaper/THE%20GOVERNMENT%20INVESTMENTNEXUS.pdf. 8. FDI in India and its growth Linkage by NCAER www.ncaer.org/downloads/journals/macrotrack_march2010.pdf. 9. Fung K.C., Alicia Garcia-Herrero Foreign Direct Investment Outflow from China and India, www.apeaweb.org/confer/hk10/papers/fung-garcia.pdf. 10. Ramkishan S. Rajan, Sunil Rongala and Ramya Ghosh, Attracting foreign Direct Investment to India, www.assocham.org/.../List%20_of_Eminent_Article_Contributors-2011.pdf. 11. Fact sheets of FDI in India from DIPP, Retrieved from palashbiswaslive.blogspot.com/.../pranab-justset-mood-with-his-budget.html.

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