Globalization of Foreign Direct Investment in India: 1900s2000

Dr. Amar KJR Nayak

Abstract
The paper focuses on the evolution of the liberalized economy in India and the globalized structure of FDI in India during the last century, 1900s-2000. Based on the major milestones in the history of FDI in India, the paper provides a systematic periodization of the history of FDI in India. Through this periodization, the paper presents the processes and dynamics of globalization process of foreign direct investment in India. The study reveals that todays liberalized economy and globalized structure of FDI in India have been an outcome of the adjustment and alignment process of the Indian Government to the dynamics of the various domestic and international pressures and global competition since the 1900s, and it is not merely a phenomenon of post 1991 as popularly perceived. The rapid change and development in FDI Policies in India in the post 1991 are only the manifestation of the change processes of the past and the enhancement of the changes adopted in the past.

Dr. Amar KJR Nayak is an Associate Professor at the Xavier Institute of Management, Bhubaneswar. Orissa. India.

Globalization of Foreign Direct Investment in India: 1900s2000

India has been a host to Foreign Direct Investment (FDI) for over a hundred years now. However, it has drawn special attention in the one and half last decades and Globalization in India has been seen as a phenomenon of post Industrial Licensing Policy of India, 1991. Despite the long history of FDI in India, the literature on FDI in India does not fully explain the processes and the dynamics by which the present Liberalized Economy and Globalized Structure of FDI in India has evolved. The main focus of my research is to explain the process by which the present Liberalized Economy and Globalized Structure of FDI in India has evolved. By Liberalized Economy, I mean the extent to which the Government of India has permitted free hand to the foreign companies in choosing the type of FDI and the level of foreign ownership in their Indian operations. From a British controlled economy, India adopted a mixed policy of state run firms and private firms and later moved to more of a marketcontrolled economy. By Globalized Structure of FDI, I mean the extent to which FDI in India has been globally represented. U.K. has been the dominant investor in India during 1900s to 1960s. Japan became a major trading partner during 1919 to 1941. USA and Germany became major investors during 1960s to 1980s. However, in the last two decades, the distribution of FDI has significantly increased from countries from European Union and Asia and Oceania making the present distribution of FDI highly globalized. The study reveals that todays liberalized economy and globalized structure of FDI in India have been an outcome of the adjustment and alignment process of the Indian Government to the dynamics of the various domestic and international pressures and global competition since the 1900s, and it is not merely a phenomenon of post 1991 as popularly perceived. The rapid change and development in FDI Policies in India in the

post 1991 are only the manifestation of the change processes of the past and the enhancement of the changes adopted in the past. This paper has been presented in five sections, viz., Research Methodology, Literature Review on FDI in India, Period Studies consisting of six periods viz., 1900s1918, 1919-1942, 1943-1961, 1962-1977, 1978-1990, and 1991-2000, Summary and Conclusion.

I. Research Methodology
This study of history of FDI in India primarily relies on an empirical study of the developments of FDI in India during 1900s to 2000. The FDI data for this paper has been collated and triangulated from various University Archives, Company Archives, Public Libraries, and National Archive in India and Japan to validate the data. The sources included secondary data, published reports of British Government in India prior to 1947, Government of India (GOI), Government of USA, Government of UK, Government of Japan, and a few foreign companies. These secondary data were supplemented and updated with unpublished data from GOI and a few foreign companies in India. The study also involved the interviews of senior executives from various foreign companies in India and a few officials from the Government of India.

II. Literature Review

Foreign Direct Investment1 (FDI) in India can be traced back to early 1900s. However, despite such a long history, literature on FDI in India is limited in data on FDI and scope of previous studies. First, there are a number of discontinuities in data on FDI
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Investments from foreign sources usually fall in two categories viz., Foreign Direct Investment and Portfolio Investments. Reserve Bank of India guidelines also classifies foreign investments into three types viz., (1) Foreign Direct Investment, (2) Portfolio Investment, and (3) Issue of Global Depository Receipt (GDR) are the Euro Issues by Indian Companies. Our study primarily focuses on FDI. However, in the precolonial period there is no clear distinction between FDI and Portfolio investment and the Euro Issues are only a development of the last few years in the 1990s (Krishnan, 2003)

to India during the last hundred years. Barring a few time zones like 1948-61, 1971-78 and 1991 onwards, the existing literature has not documented the complete history of FDI in India. More often than not, data in one secondary source do not match with that of another source. Second, the scope of different studies on FDI in India has been limited. Most of the existing studies on FDI to India have either focused on the amount of flow of FDI to India or focused on the impact of FDI to India. Recent literature on FDI focuses on flow of FDI to India since 1991 and its impact on the Indian economy. Some studies have discussed the impact of FDI in India during the period 1948-61 (Kidron, 1965, and Kurian, 1966). The study of Wilkins (1994) indicated that the flow of FDI to India during the period 1921-29. There is another study that estimated the flow of FDI to India during 1971-78 (Athreye and Kapur, 1999). There have been a few studies that have dealt with the performance of foreign firms in India. It is argued that British firms in India succeeded in the early decades of the twentieth century because of their nexus within the British Government in India (Bagchi, 1972). Another study argued that British firms failed in the post 19472 period because of their short-term operational structures that they had created in the pre 1947 period (Tomlinson, 1989). It has also been argued that foreign firms failed in India because of the nexus of local firms, local financial institutions and Government of India (Encarnation, 1989). In these studies both success and failure of foreign firms in India has been attributed to the local Government. There is a general notion that the inward FDI to India started after the Industrial Liberalization Policy, 1991. Further, the huge influx of inward FDI to India has been attributed to the above policy of 1991. It appears as if the dynamism of inward FDI has been planned and implemented by the Government of India and the role of foreign multinational companies, foreign governments and international agencies had hardly been

In the year 1947, India became independent of the colonial rule of British Government. The regulatory framework of India changed when it moved form being a colonial state to being an independent state.

explained. In short, we find that the existing literature on FDI in India falls short of providing a comprehensive understanding of the nature and the context of FDI in India. It is in this context that the need to study the history of FDI in India arises. The character and content of FDI in India and how India as a host country have evolved during the twentieth century is the focus of this paper.

III. Period Studies: FDI in India, 1900s-2000

Each of the period studies focuses on three issues viz., overall socio-economic and political situation in India, industrial policy and FDI policy in the country and nature and pattern of direct investments by foreign firms in India.

FDI in India, 1900s-1918

India was an agricultural based economy during this period. People in the country largely depended on agriculture. The main commercial crops produced during this time were cotton, tea, and jute. The domestic business had begun in some measure as the number of joint stock companies increased from 1550 in the year 1904-05 to 2668 in the year 1917-1918 (Department of Commercial Intelligence & Statistics, India, Report on Joint Stock Companies, 1924). India was a colony of United Kingdom during this period and India was rather a stable colony with abundant natural and mineral resources. There was no specific industrial policy in the country then. India largely severed the natural resource requirement of the British Government and British companies. On the policy of FDI in India, there was little barrier to foreign investments in India during this period as was the case in the rest of the world. The global environment was most deregulated as far as foreign trade and investment was concerned during the period before the end of the First World War that is 1918 (Jones, 1996).

The United Kingdom dominated the foreign trade and investment in India during this time. A rough estimate shows that about 14% of British investments came to India and other Asian countries during 1865-1914 (Bagchi, 1972). India ranked eighth as a host to foreign investments in 1914 (Wilkins, 1994). There were about 204 British Managing Agents and a few manufacturing companies from U.K, Switzerland, Netherlands, Germany, USA, and Japan engaged in trading and manufacturing activities during this period. The Managing agents were very large and they had business interest in large number of businesses. Many of these Managing Agents held as many as 15-20 different types of companies engaged in tea, jute, sugar and coal. Besides their interests in tea, jute, and coal, the Managing Agents had interests in many other businesses like timber, paper, insurance, shipping, indigo, and sugar (Bagchi, 1972). Japanese trading firms had also made some investments in India during this period. Please refer to Table A1 in Appendix for the list of British Managing Agents in India during this period. Mitsui Bussan had setup a trading office in Bombay in 1892 and subsequently many Japanese companies started trading on raw cotton and yarn with India in the late nineteenth and early twentieth centuries3. There were about 11 manufacturing companies from UK, Europe, USA and Japan that traded their products in India. Many of the British manufacturing companies like Unilever, ITC, Glaxo, ICI, GEC, Goodlass Nerolac, and Britania Biscuits traded their goods in India by importing form their parent companies. American companies like Chicago Pneumatics and Ludlow Jute, the Dutch company, Margarine Unie and the Japanese company, Denso operated in India during this period. Please refer to Table A2,

Tetsuya Kuwahara (Seminar discussions, 2000) and Manuscript of Mitsui Bussan Kaisha 100 years, volume 1, 1978 (unpublished) provide details about the historical roots of Japanese business in India in the late nineteenth and early twentieth centuries. Mitsui Bussan sent Mr. Yasukawa to India in December 1892, and soon after it set up a purchase office in Bombay in February 1893. Similarly, Nihon Menka set up its office in India in 1893. Gosho was another large trading house that set up its office in India. Besides, these three major trading houses, many smaller trading houses like Itochu, Marubeni, and many others started trading on raw cotton and yarn with India.

Table A3 and Table A4 in Appendix for a sample list of foreign companies from different countries that came to India during this period. In summary, there were virtually no restrictions on FDI during this period. However, until the end of First World War, 1918, the foreign investment in India was totally dominated by the British companies. India was also being ruled by Britain during this period. Trading and Services sectors were the major areas of foreign investments in India during this period.

FDI in India, 1919-1942

United Kingdom appeared vulnerable by the end of the World War I in 1918 and a new phase in the history of FDI in India came about beginning 1919. The United States of America and Japan emerged as powerful nations after the World War-I (E.H Carr, 1994). Under the pressure of Indians to share power, the British Government enacted the Government of India Act 19194, whereby Indians had greater say in the governance of India. With the weakening of U.K. and the emergence of alternate world powers, the freedom movement in India got further support from the world community. These political developments had some amount of bearing on the pattern of foreign investments in India from 1919 onwards. Following the Government of India Act, 1919 that allowed Indian legislator to share power with British officials, Rowlatt Act5 came into force in

The means of achieving the proposed measure were later enshrined in the Government of India Act of 1919, which introduced the principle of a dual mode of administration, or dyarchy, in which both elected Indian legislators and appointed British officials shared power. The act also expanded the central and provincial legislatures and widened the franchise considerably. Dyarchy set in motion certain real changes at the provincial level. A number of non controversial or "transferred" portfolios such as agriculture, local government, health, education, and public works were handed over to Indians, while more sensitive matters such as finance, taxation, and maintaining law and order were retained by the provincial British administrators (Sarkar, 1983, and Chandra, 1989) Rowlatt Act, 1919 made war time restrictions on civil rights permanent through a system of special courts and detention without trial for a maximum of two years. Through this Act anyone in India could be arrested on a simple pretext (Sarkar, 1983, and Chandra, 1989).
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India. M.K. Gandhi6, for the first time applied his non-violent movement on a national scale in India to resists this legislation of the British Government. There were many small and large mass scale uprising and resistance to British rule in India during this period. The local manufacturing companies were also on the rise. The number of registered manufacturing companies grew from 111 in the year 1923 to 365 by the year 1940 (Department of Commercial Intelligence & Statistics, India, Report on Joint Stock Companies, 1929, 1931, 1939, 1941, and 1951). Trade and investment from the USA increased in India during this period. Among the American companies, the most notable ones that started their operation in India during this period are General Motors, Ford Motors, and Colgate Palmolive. General Motors started assembling passenger cars in Bombay in 1928. Soon after that Ford Motors also started its assembling unit in Madras in 1930 and then a year later, in 1931 it started assembly units in Bombay and Calcutta. Colgate-Palmolive started its toothpaste business in India in the year 1937. Trade investments from Japan also increased manifold during this period. By 1928, Japan emerged as one of the largest cotton tradeing partner of India. Since the Japanese products were better in quality and competitive in price7, the Japanese textile companies outperformed the British textile companies in India. Japan exported more than half (57 %) of its cotton yarn and 28% of its piece goods to India in 1932. It also imported as much as 47% of its raw cotton requirement from India in 1928, the volume
Mohandas Karamchand Gandhi, who spearheaded the freedom movement in India, was a barrister by profession. He returned to India from South Africa in the year 1914 and started the Satyagraha Movement, a non-violent resistance to British rule in India. He first tried this form of resistance to different types of rent seeking of British Government in Champaran, Kheda and Ahmedabad in Gujurat. His first nation-wide resistance to British Policy was in 1919 against the Rowlatt Act. Later in 1930, he called upon the general public on a large scale to participate in a march to Dandi in India to break the salt law of the British Government. As per the rules of the British Government, Indians were not allowed to make salt with out the permission of the British Government. He undertook many such movements to free India from the British Rule. Quit India Movement in 1942 was another of his mass scale movements that culminated in India becoming an independent state (Sarkar, 1983, and Chandra, 1989). 7 Tetsuya Kuwahara (2000) discusses in detail in the Case Study of Kanegafuchi Cotton Spinning Company and the role Sanji Muto played in building high productivity and efficiency of Japanese textile spinning companies. Kuwahara mentions how the improvement in quality and productivity of Kanegafuchi Cotton Spinning Company had a great influence in the overall development of international competitiveness of Japanese textile and textile related companies in the early 1900s.
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increased to more than half (51%) in 1937. Please refer to Table A5 and Table A6 in Appendix for details of the volumes of trade in different items during this period. Nonetheless, British business interests remained as strong as ever. India was still a hot spot for investments by British companies during this period. Between 1930 and 1945, as many as 28 new manufacturing British subsidiaries started their operations in India, Tomlinson (1975). With the continued interest of British investments and the additional interest of American, Japanese and other European countries, the total inward stock of foreign direct investment was about 1.0 billion USD by 1929. India ranked third among the favorable hosts to foreign direct investments in 1929, Wilkins (1994). Further, under local and international pressures, the British Government in India, passed the Government of India Act, 19358. This Act allowed the Indian legislators to voice their concern and to lobby on behalf of Indian businesses. The local businessmen and politicians strongly pushed the British Government in India to introduce import duties9 on goods imported to India in order to protect the local industries. This seems to have activated the foreign companies to make direct investments in manufacturing their products in India. As many as 30 foreign companies registered in India during this period as compared to only 7 during the previous period, 1901-1918 (Centre for Monitoring Indian Economy, September 2003). Many of the British and Dutch companies that were engaged in trading activities started to invest in local manufacturing in the 1930s. For example, Unilever invested heavily in local manufacturing of bathing soaps, washing soaps, and cooking oil/fat. Hindustan Vanaspati Manufacturing Company started manufacturing vanaspati (a
The Congress Party and Muslim Parties were allowed to contest provincial elections and more people could participate in the electoral process. British Government retained the central powers. However, the sharing of power at the provincial level by both appointed officials of British Government and Indian legislators as per Government of India Act 1919 was done away with. The Indian legislators fully represented their respective provinces. D.K. Fieldhouse (1972) has discussed the local government introduction of high import duties on foreign goods during the 1930s. The British Government in India was highly pressurized by the Indian parliamentarians to provide protection to the local entrepreneurs during this period B.R. Tomlinson (1989) and A.K Bagchi (1972) also highlight the issue of duties on imported goods to India.
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hydrogenated cooking oil) in 1932 at Sewri, Bombay. Later, Lever Brothers India started soap manufacturing at Sewri, Bombay in 1934. Metal Box started to manufacture tin containers in 1934. ICI commenced its manufacturing activities in 1939 by setting up Alkali and Chemical Corporation of India Limited in Rishra, West Bengal. In 1935, J & P Coats (Hunter, 1969) began to invest in local manufacturing under the name Acme Thread Company Limited. And, Dunlop started its tire manufacturing in the year 1936. In fact, the FDI in the Indian manufacturing industries started in the true sense during this period. Please refer to Table A2, Table A3 and Table A4 in Appendix for a sample list of foreign companies from different countries that came to India during this period. By 1942, the non-violent movement started by M K Gandhi had snowballed to become an unstoppable Freedom Movement. In 1942, the Indian National Congress (INC)10 started the Quit India Movement11 that greatly disrupted foreign businesses in India and British business in particular. The increasing conflict within India and the competition among British textile industry, Indian textile industry and Japanese textile industry halted the huge textile trade transaction that Japan had with India in the year 1942. Please refer to Table A5 and Table A6 in Appendix for data on trade of cotton and cotton yarn between Japan and India. In short, during 1919-42, while U.K. became vulnerable, USA and Japan emerged as powerful nations. The American and the Japanese companies entered the Indian market in a big way. Japans trade with India not only reached an all time high but

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A O Hume formed the Indian National Congress in the year 1885. This forum was to bring together the Indian leaders with a purpose to discuss, debate and present the concerns of the people of India to the British Government in India. Over the years, this forum became the major instrument to fight for freedom of India. Most of the Indian leaders like G K Gokhale, B G Tilak, M K Gandhi, J L Nehru, Vallabhbhai Patel and most of the Indian leaders prior to 1947 were part of INC.

Between 1940 and 1942, the INC launched two abortive agitations against the British, and 60,000 Congress members were arrested, including Gandhi and Nehru. 1942 begins the Quit India movement, a demand for immediate and complete independence at any cost along with a commitment to noncooperation and boycott of all things British. Gandhi said this orderly disciplined anarchy should go, and if as a result there is complete lawlessness I would risk it. Many INC leaders were arrested for this view. By the end of Second World War, Britain was unable to spend the needed money on maintaining India and so in 1944, it began a plan to transfer power to the Indians.

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it also touched rock bottom due to the various interest groups like the British Companies, British Government and the Indian Companies. As far as the textile business was concerned, there was a triangular competition of Lancashire Textile Mills, Shanghai Textile Mills and Bombay Textile Mills. The representation of Indians increased in the governance of the British Government in India. The local businesses pressed for protection of local industries due to the business competition within and outside India leading to the introduction of import duties on foreign goods for the first time in India. This set in a new shift in the composition of foreign investment in India as many foreign companies directly invested in the manufacturing activities in India. Indeed, this period marked the beginning of FDI in India.

FDI in India, 1943-1961

The year 1943 marked the beginning of a new period in the history of FDI in India. Direct Investment by foreign companies, activated in the 1930s was enhanced and encouraged by both the Indian business houses and by the newly formed Government of India (GOI) during this period. Local industries had felt the need for foreign technology and foreign capital by 1942. They largely favored the flow of foreign technology and foreign capital from around the world. Although, the British Government formally transferred power to the Indians on August 15, 1947, the policies on FDI were largely dictated by the local business houses and politicians from the around the beginning of this period. Within five years that is from 1943 to 1945, 14 foreign companies registered themselves in India and this trend continued in the subsequent years until 1961. As many as 27 foreign companies were registered in India from 1948 to 1961. Please refer to Table A7 in Appendix for the number of foreign companies that were registered in India during this period. After India became politically independent in 1947, the GOI was faced with myriad of problems. Economic and industrial development of India was one of the major tasks at hand. First of all, the GOI nationalized many companies in some industries that the Government considered strategic for the country. Companies in the industries like

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Power, Oil & Petroleum, Mining, Banking, Insurance, Airlines, etc, were brought under the control of the Government. Then it adopted the Five-Year Plan12 method to improve the economic and industrial condition of the country. Further, to strengthen the public sector companies, the GOI under the leadership of Nehru13 sought the financial and technical support of Russia, Germany and the United Kingdom to set up large-scale industrial projects in India. GOI followed a dual policy of state involvement and private involvement in the business activities in the country. GOI promoted public sector companies in areas like steel, oil, power, defense, telecommunications and the private sector investments were encouraged in areas like chemicals, light industries, personal care and consumer goods. Having experienced the level of competition in the global markets, the Indian textile and textile related businesses had been looking for foreign technology and foreign capital by the end of 1930s (Bagchi, 1972). Further, with the entry of more foreign companies during the 1930s and 1940s, the competition with in the domestic market also peaked up and the pressure to upgrade technology increased among the Indian companies. The GOI had also understood the need for getting both foreign technology and foreign capital for its industrial growth. It also needed foreign exchange to meet the burgeoning imports of essential commodities. In addition, GOI faced severe foreign exchange problem in 1957-58 and hence encouraged foreign investment in the late 1950s to attract larger foreign exchange. All these factors compelled the Government to invite foreign capital and technology to India during this period. This is reflected by the liberal policies on foreign investments in the First Five-Year Plan (1951-1955) and the Second Five-Year Plan (1956-1961). To enhance its developmental activities, the GOI also informally started asking the large foreign and domestic companies in India to take up some of the development
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The GOI constituted Planning Commission in the year 1950. For every five year in advance, this commission were to plan in advance on the nature and emphasis of investment in different sectors so that India could grow steadily on all fronts. The First Five Year Plan was for the period 1951-1955.

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Jawahar Lal Nehru was the first Prime Minister of free India. He took charge of the country when the British Government transferred power to India in 1947 and was elected first Prime Minister of the country in 1950.

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work of the Government by investing in industries that it could not undertake. Foreign companies like Glaxo, Unilever, ICI, General Motors, Ford Motors, Pepsi Drinks, etc were informally asked to invest in new ventures and at the same time to include local equity in their businesses in India (Fieldhouse, 1978, Davenport, 1992). While some foreign companies undertook the developmental role in India, many others quit India during this period. For instance, General Motors and Ford Motors that enjoyed monopolistic position in India for more than 20 years closed their operations in 1953. Similarly, unwilling to abide by the government regulation to include local participation in its equity, Pepsi Drinks ceased its operation in India in 1961 shortly after starting its operation in 1956. It is generally believed that the policies of GOI to nationalize companies in certain industries and the informal pressures of GOI on foreign companies to increase local equity participation in India reduced the flow of FDI into India during this period. Contrary to this popular perception, this study finds that FDI to India during this period actually rose and reached a peak in the year 1961. From 1948 to 1961, the amount of FDI stock grew from 2558 million INR (Indian Rupee) to 5285 million INR, an increase of nearly 143 %. Similarly, the number of foreign collaborations with Indian companies grew significantly. The number of joint ventures increased from 34 in 1951 to 464 in 1961, an increase of nearly 14 times in a period of 11 years. A large number of American companies invested in India during this period. Over one hundred American companies entered India during the last three years, viz. 1956-61, of this period (U.S. Department of commerce, 1961). Please refer to Table A8 to Table A10 in Appendix for the list of American companies that started business in India during these three years. The share of the American companies remarkably increased from 4.4 % in 1948 to over 13% in 1961. German and Swiss companies increased their investment amount modestly. Japan hardly had any investment in India from 1942 to the middle of fifties. The GOI was able to direct FDI from trading and services sectors to the manufacturing sector. Investments in trade and plantation gradually reduced to less than half (37%) by 1948 and then it reduced to less than a quarter (23%) by 1961 and it was a mere 5% by 1961. While the share of foreign 13

investments in trade fell, the investment in the manufacturing sector increased to over 60% by the end of this period. It is interesting to observe that the British investments grew during this period due to the deeper commitment of British companies in India prior to 1947. In addition, companies like Cadbury Chocolates, Tube Investments, Reckitt & Coleman, and Horlicks from the U.K. ventured into India during this period. Further, American companies like Pfizer, Parke Davis, Otis Elevator, Coke, Pepsi, Vicks Products, etc entered India. While Nestle, Siemens, Pharmacia, Hoechst, BASF, etc came from Europe. Please refer to Table A2, Table A3 and Table A4.in Appendix for a sample list of foreign companies from different countries that came to India during this period. Although, the Japanese trading firms had stopped their trading of cotton and cotton yarn by 1942, a few Japanese manufacturing companies like Asahi Glass, Shimada Glass, Nippon Chemicals, Hitachi, and Nichimen came to India in this period. In short, the amount of FDI and the number of foreign joint ventures in India increased significantly during this period. With India becoming free from the British rule in 1947, the opportunity for companies from Europe and America arose. While some of the British manufacturing companies increased their investments in India during this period, companies from other countries especially from USA entered India in large numbers. There was also a qualitative change in the nature of FDI in India. Share of FDI in manufacturing sector also increased significantly during this period, due to the FDI policy guidelines of the Government of India.

FDI in India, 1962-1977

The year 1962 is the beginning of another important phase in the history of FDI in India. This year marks a shift in the trends of FDI in India. In the previous period, the Government of India had begun to informally suggest the foreign companies to include Indian equity in their companies. However, during this period, these issues were

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formalized through the legislation of Foreign Exchange Regulation Act (FERA)14 in 1973. Foreign companies also came under the Monopolies and Restrictive Policy (MRTP)15, 1969 Act during this period. MRTP (1969) Act restricted companies on the size of operation and the pricing of products and services. The Reserve Bank of India geared itself to implement the above act. As a result, many companies that did not want to increase equity participation of Indians as per section (2) of FERA, 1973 decided to cease their operations in India. As many as 54 companies applied to wind up their operations by 1977-78 since the implementation of the above Act in 1974 and 9 companies applied to wind up their operations in 1980-81 (Annual Reports, Reserve Bank of India16, 1977, 1978, 1981). The closure of some well performing foreign companies like Coca Cola in 1977 and IBM in 1978 are some of the well-known cases of this period. In the 1960s, when the Government advised the foreign companies to include local participation in their existing equity, many foreign companies reacted adversely to such suggestions of the Government. Unwilling to abide by the government regulation to include local participation in its equity, Pepsi Drinks ceased its operation in India in 1961-62 shortly after starting its operation in 1956. When the Government informally suggested companies to invest in businesses like oil mills, fertilizers, and chemicals, industries in which the Government could not invest, many companies objected to the policy of the Government. However, some companies like Unilever invested in oil mills and ICI invested in fertilizer. ICI emerged as the biggest manufacturer of fertilizer by 1969.

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According to FERA (1973), all foreign companies that owned more than 40% equity in their Indian operations were required to get the permission of Reserve Bank of India to continue their business in India. As per section (2) of FERA, 1973, foreign firms were required to include local participation in the equity of foreign companies in India. Depending on the nature of business, some companies were allowed to own 51% of equity and others were allowed to own 74% of equity (Roy, 1973) MRTP (1969) was introduced to ensure that the operation of economic systems does not create the concentration of power in hands of a few people and minimizes the trade and monopolistic practices of private companies in India. Through this Act, both the domestic and foreign private companies came under the strict vigilance especially on the size of operations and pricing of products. Reserve Bank of India is the Central Bank of India. In other words, this is the Federal Bank of India.

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The amount of FDI and the number of foreign joint ventures from all the foreign countries declined drastically from 1962 to 1968 and had an erratic trend from 1969 till 1977. The number of foreign collaborations reduced from 464 in the year 1961 to 131 in the year 1968. Although, the number of new collaborations drastically reduced and many of the foreign companies disinvested from India during this period, some of the existing large foreign companies continued their operations in India. In fact, some of the companies consolidated their market positions in India during this period. For instance, Unilever invested in Modern Foods, Indexport Ltd., and Hind Lever Chemicals. ICI set up Chemical and Fibers of India Limited in Thane in 1963 to manufacture polyester staple fibers. It started manufacturing fertilizer in Panki near Kanpur in 1969 and set up the ICI Research and Technology Center in Thane in 1976. Some of these companies also invested in export activities as GOI provided incentives for exports by setting up two Export Processing Zones (EPZs), viz., Kandla in 1965 and Santa Cruz in 1972. Besides the increasing participation of the existing large foreign companies, quite a few well-known British, American, Japanese and some European companies also invested in India during this period. British companies like BPL, and American companies like Cummins, Frick Company, E Merck, Precision Gears, and Singer Machine entered India. While Continental AG, Heinrich Schmidt AG, Piaggio, Wartsila Oy were a few European companies, Kokoku Wires, Mitsubishi, Yuken, Sankyo, and Daikin were a few Japanese companies that invested in India during this period. In short, this period clearly marks a shift in the FDI Policy of the Government of India. FERA, 1973 was the culmination of the manifestation of objectives of the Government that was pursued informally in the previous period. As a result of the changes in the policy, nearly 80 foreign companies ceased their operations in India and the number of joint ventures from all the foreign countries decreased dramatically. Interestingly, while many foreign companies left India, many new companies from USA, Europe and Japan ventured into India during this period. Further, some of the major

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British companies that already had direct investments in India consolidated their businesses with further investments in India during this period.

FDI in India, 1978-1990

The year 1978 marked another new phase in the liberalization and globalization process of FDI in India. The Industrial Policy Statement, 1977 of GOI announced the relaxation in remittances of profits, royalties, dividends and repatriation of capital of foreign companies. Further, the Industrial Policy, 1980 of GOI set the tone of liberalization in India in a slow but steady pace. Industrial Licensing was streamlined and made easier. Provisions in MRTP Act (1969) were modified to simplify business transactions. Export and Import norms were also changed to encourage FDI in India. Prior to 1978 most of the items that were imported to India were routed through State Trading Corporation, a government controlled organization. Only a few items that were inconsequential to the total outflow or inflow of foreign exchange were kept in the list of Open General License (OGL). Beginning 1978, GOI transferred most of the items that were earlier imported through State Trading Corporation to Open General License (OGL), wherein these imports and exports could be routed through private firms. Nearly 350 importable items were liberalized in two years (19841985) and many more were subsequently added to the list of OGL. The government also reduced import restrictions and tariffs. Since 1980, the tariffs in general have come down to nearly 25% and in some cases up to 5% - 10%. Further, to boost the exports from India, GOI provided special facilities and tax privileges to foreign companies to set up 100% export oriented units. GOI set up four more export processing zones (EPZ) in addition to the two that were already set up in the previous period. All these policy changes led to greater liberalization on the exports and imports of India. The total number of joint ventures increased steadily from 1978-79 until 1984-85, 17

then decreased and showed signs of recovery during 1989-90. USA emerged to be the biggest contributor to the number of joint ventures in India during this period. Germany was the second largest contributor. The share of British companies in the total number of joint ventures clearly declined in this period as compared to their overwhelming dominance in the previous years. The share of other countries including those from Europe increased gradually. The amount of FDI to India greatly fluctuated during this period including the amounts of FDI from the two leading countries, viz. USA and Germany. FDI from Japan increased in 1982-83. However, share of FDI from the Japanese companies declined slowly from 1982 until the end of 1990. The share of FDI from U.K. also dramatically went down during this period. However, the liberalization process initiated in this period has shown overall positive trends in the inward FDI as compared to the previous period. The number of foreign companies that registered in India during this period more than doubled to 128 from only 62 during the previous period, 1962-1977. The total number of joint ventures also increased from 307 in 1978 to 703 in 1990. Similarly, the amount of FDI rose from 89 million INR to 1238 million INR, an increase of over 13 times. GOI made a series of changes in the export and import policies in India during this period. Although, there have been fluctuations in the number of joint ventures and the amount of FDI in India, the amount of FDI increased by nearly 13 times during this period. In comparison to that of the previous period, the number foreign companies registered in India doubled during this period.

FDI in India, 1991-2000

The year 1991 marks a new growth phase of FDI in India with an all time high flow of FDI. Following the Industrial Policy (1991)17, a large number of foreign

17

The Industrial Policy (1991) made several provision to liberalize the flow of FDI into the country. With this many sectors were opened up for FDI in India. A phase wise reduction of import duties was outlined in this policy. This policy marked the beginning of many economic and fiscal reforms in India.

18

companies from different parts of the world rushed into India. In this period, in addition to thousands of foreign collaborations in India, as many as 145 foreign companies registered in India within a span of 10 years from 1991-2000. Companies like General Motors, Ford Motors, and IBM that divested from India in the 1950s and 1970s reentered India during this period. A large number of Asian companies like Daewoo Motors, Hyundai Motors and LG Electronics from S. Korea, Matsushita Television and Honda Motors from Japan invested in India during this period. The Government of India faced severe foreign exchange crisis by 1990 and its foreign exchange reserve had reached an unsustainable level. International Monetary Fund (IMF) and World Bank agreed to provide loans to India on the conditions that India will make major changes to liberalize trade and investments in India. The domestic pressure to meet the imports of essential commodities and the external pressure to liberalize Indian market forced the Government of India to accelerate the liberalization process in India. With the legislation of the Industrial Licensing Policy, 1991, industrial licensing was abolished except for 18 industries. FDI up to 51% equity was allowed in 34 formerly high priority industries and the concept of phased manufacturing requirement on foreign companies was removed. Further, the tariffs on imports have been steadily reduced in every budget since 1991. Subsequently, GOI replaced FERA, 1973 that regulated all foreign exchange transactions with Foreign Exchange Management Act (FEMA), 199918. The objectives of FEMA have been to facilitate external trade and payments and to promote orderly development and maintenance of foreign exchange market. But for sectors like banking, civil aviation, petroleum, real estate, venture capital funds, infrastructure, service sector, atomic energy, defense, agriculture and plantation, print media, broadcasting and postal services, automatic approval of FDI were allowed in all other sectors during this period.

18

FEMA was created to facilitate external trade and payments and to promote orderly development and maintenance of foreign exchange market. The objective of FEMA has been to facilitate and not regulate foreign trade and investment as it was in FERA (1973), (Roy, 2000). Many of the FDI approval processes have been simplified to smoothen the approval process with the enactment of this Act.

19

The total number of foreign collaborations increased from 976 in the year 1991 to 2144 in the year 2000. Similarly, the amount of FDI increased from 5156 million INR to 373722 million INR during this period. It is also observed that there has been a significant shift in the share of FDI from different countries that have been investing in India. The share of FDI from the United Kingdom reduced to almost 10% and the share of FDI from UK & USA also decreased during this period. Interestingly the share of other countries including S. Korea, Malaysia, Australia, and countries from Asia and European Union increased to over 65% of the total FDI during this period. In a period of about 40 years since the British left India, USA has gained more control of the Indian economy through direct investments of American companies in India. Owing to the poor balance of payment position in 1990, India had to seek loan from the International Monetary Fund (IMF) that is largely controlled by USA. IMF used this opportunity to force India to liberalize its economy so that foreign companies could have more & easy access to the Indian economy and market. In the recent decade, however, companies from many other countries have increased their share of direct investments in India. In summary, the poor balance of payment position of India and pressure of IMF and World Bank to liberalize the Indian economy forced the Government of India to accelerate the pace of liberalization process in India since 1991. While the shares of FDI from traditionally dominant countries like the U.K. and the USA have fallen, the shares of FDI from other countries including the countries from Asia and the European Union have increased from 53% in 1991 to 86% in 2000. The power equation of U.K., USA, Japan and other European countries with India had changed by the end of this period.

20

IV. Summary
1. FDI Trends in Non Manufacturing and Manufacturing, 1921-2000
Most of the investments in the first fifty years have been in trade and finance with a focus on Plantation & Mining industries like tea, jute and coal. By 1948, the share of FDI in trade and finance was 64%. However, by 1991-99, this had dropped to 12% and the share of FDI in the manufacturing sector has grown to nearly 88 %. Figure 1 shows the reversal in the trend of FDI in trade & finance versus manufacturing during 1921 to 2000. This also shows the importance of manufacturing sector in India and the steadiness in the objectives of the Government of India since 1947. Please refer to Table A12 in Appendix for the actual percentages of FDI in the two sectors during the period 1921 to 2000. Figure 1: Trends in Sectorwise Share of FDI, 1921 2000
100 90 80 70 60 50 40 30 20 10 0 1921 1938 1948 1955 1960 1991 2000
Manufacturing Non Manufacturing

Source: Compiled from (a) Tomlinson (1989), (b) Kurian (1966), (c) Ganesh (1997), (d) India Investment Center, Government of India, (e) Center for Industrial & Economic Research, (f) International Investment Position of India (2003), and (g) Ministry of Finance, Government of India.

21

2. Trends in Amount of FDI, 1900s-2000 Despite the changes in the economic and political circumstances there has been a steady rise in the average annual amount of FDI to India during the period 1921 to 2000. Figure 2 shows the annual average inward FDI to India during 1921 to 2000. Please see Table A13 in Appendix for the actual amount of FDI during 1921-2000. The amount shown for the period 1991-2002, however, is the amount approved by the Government of India and not the actual amount invested in India. Figure 2: Annual Average FDI in India, 1921-2000 (in million INR)
6
Log of Yearly FDI in million INR

5 4 3 2 1 0
1 9 2 1 -1 9 38 1 94 9 -1 9 6 1 1 9 6 2 -1 9 7 7 1 9 8 0 -1 9 90 1 9 91 -2 0 0 0

Ye a rs

Source: Compiled from (a) Tomlinson (1989), (b) Wilkins (1994), (c) India Investment Centre (1967-70),
(d) Kurian (1996), and (e) Indian Investment Center (1991-2000).

The most noticeable change in the investment pattern has been the shift in the share of amount of FDI from different countries. Until 1964-65, FDI from U.K. constituted over 85% of the total FDI. Later during 1919 to 1941, Japan was a major trading partner of India. During 1965 to 1990, after India was freed from British rule, USA and Germany became the lead investors. However, in recent decade, the other

22

countries19 including countries from European Union and Asia have greatly increased their share of FDI in India. The share of other countries increased from 52% in 1991 to 86% in 2000. The trends of yearly countrywise amount of FDI to India during 19492000 are shown in Figure 3. Please see Table A14 in Appendix for the yearly countrywise actual amounts of FDI to India during 1949-2000. Figure 3: Amount of FDI in India: 1949-2000
6.00

FDI in Log10 Million INR

5.00 4.00 3.00 2.00 1.00 0.00 -1.00 -2.00 Years: 1949-2000 UK USA Germany Japan Others

Source: India Investment Centre

3. Trends in Number of Foreign Companies, 1900s-2000:

Foreign companies have invested in India through out the twentieth century either as wholly owned subsidiaries or as joint venture partners. The total number of foreign companies newly registered in India has steadily increased during the different time periods in the twentieth century. The number of registered companies in each period is shown in Figure 4.

19

India Investment Center, Government of India data shows that the FDI from many Asian and South East Asian countries to India has significantly increased in the recent years. In fact, the largest investor in India in 1999 among all the foreign countries has been Mauritius. Korea, and Australia have also significantly increased their share of investments in India in the recent years.

23

Figure 4: Number of Foreign Companies Registered in India: 1901-2000

Number of foreign companies registered

160 140 120 100 80 60 40 20 0

1901 - 1918 1919 - 1942 1943 - 1961 1962 - 1977 1978 - 1990 1991 - 2000

Ye ar

Source: Centre for Monitoring Indian Economy The number of foreign collaborations in India has also steadily increased during the period 1951 to 2000. However, there has been significant shift in the countrywise number of foreign collaborations in India during the same period. The countrywise trends in the number of collaborations are shown in Figure 5. Please refer to Table A15 in Appendix for the actual number of foreign collaborations in India during 1951 - 2000. Figure 3.5: Trends in Countrywise Number of Foreign collaborations: 1951-2000
1400 Number of Collaborations 1200 1000 800 600 400 200 0 Years: 1951-2000
UK USA Germany Japan Others

Source: India Investment Centre

24

4. Periodization of FDI in India, 1900s-2000

The history of FDI in India during the twentieth century has evolved through a six time periods, viz., 1900s-1918, 1919-1942, 1943-1961, 1962-1977, 1978-1990, and 1991-2000. During the first stage (1900s-1918), there were hardly any restrictions on the nature and type of FDI. The foreign investments could flow freely into India. However, except U.K., most of the countries neither had the need and nor the will to invest in India. Foreign Investment to India was mainly through the Managing Agents from U.K. It was in the second phase (1919-1942) that FDI in India actually originated. The introduction of import duties during this period stimulated many British companies to invest in the Indian manufacturing sector to protect their businesses in India. Although, the Japanese companies increased their share of trade with India, U.K. remained to be the dominant investor in India during this period. The third phase (1943-1961) saw a huge increase in the flow of FDI into India. During this period the Indian companies and GOI realized the need to import technology and finance from foreign companies and encouraged the same. This led to ambitious investments by many companies from countries like U.K. and USA. The fourth phase (1962-1977) marked the Indian Governments regulatory regime that imposed severe restrictions to control foreign exchange, type of FDI and ownership of foreign companies in India. These restrictions led to a controlled flow of FDI in India and nearly eighty foreign companies also divested from India during this period. The fifth phase (1978-1990) saw a new direction in the history of FDI in India with liberalization in imports and exports of the country. Although, the amount of FDI increased by over 13 times during this period, foreign companies invested cautiously during this period with a wait and watch attitude.

25

And, in the final phase (1991-2000), the liberalization process in India was accelerated under the behest of IMF and World Bank. There have been very high growths in the amount of inward FDI and the number of joint ventures in India. More importantly, FDI has flowed from across the world resulting in a globalized structure of FDI in India. The history of FDI in India during the twentieth century may be summarized to have evolved through a six-stage process: Free Flow (1900s-1918), Stimulated Flow (1919-1942), Ambitious Flow (1943-1961), Controlled Flow (1962-1977), Cautious Flow (1978-1990), and Globalized Flow (1991-2000). The history of FDI in India is summarized in Table 1. The table summarizes the periods, the drivers of change, the driving forces, the major sources of direct investments, the nature of investments and the phases of evolution of present globalization of FDI in India.

V. CONCLUSION
The historical analysis of FDI in India during the period 1900s-2000 shows that todays liberalized economy and globalized structure of FDI in India have been an outcome of the adjustment and alignment process of the Indian Government to the dynamics of the various domestic and international pressures and global competition since the 1900s, and it is not merely a phenomenon of post 1991 as popularly perceived. The rapid change and development in FDI Policies in India in the post 1991 are only the manifestation of the change processes of the past and the enhancement of the changes adopted in the past.

26

Table 1: History of FDI in India: 1900s-2004 Characteristics / Drivers of Change Period 1900s-1918 1919-1942 U.K. U.K., Japan and Local Textile companies Government of India Driving Forces Major sources of Investments U.K. U.K. and Japan Nature of Investments Trading & Finance Trading, Finance & Manufacturing Manufacturing, Sales & Services Manufacturing Stages of Evolution

No restriction in FDI Import duties were introduced Demand for foreign technology & capital in manufacturing sector MRTP, 1970, FERA, 1973, and Investments in public sector companies Liberalization of imports and exports Acceleration of liberalization and Globalization of FDI

Free Flow Phase Stimulated Phase

1943-1961

U.K. and U.S.A.

Ambitious Stage Phase Controlled Phase

1962-1977

Government of India

U.S.A., Germany and U.K.

1978-1990

Government of India, WTO and Local companies IMF, World Bank, WTO and Local Business Houses.

U.S.A. and Germany

Manufacturing

Cautious Phase

1991-2000

Globalized

Manufacturing, Trade Globalized Phase & Financial Service

REFERENCES
1. 2. 3. 4. 5. 6. 7. 8. 9. All Japan Cotton Spinners Association (1949), Cotton Statistics of Japan, 1903-1944, Osaka, Japan Athreye, S. & Kapur, S. (1999) Foreign Controlled Manufacturing Firms in India Long-Term Trends Economic and Political Weekly, November 27, 1999 Bagchi, A.K. (1972) Private Investment in India 1900-1939, New York: Cambridge University Press. Carr, E. H. (1994) International Relations between the tow World Wars 1919-1939, London, Macmillan. Center for Industrial & Economic Research (1986) Industrial Data Book, New Delhi, Government of India. Center for Industrial & Economic Research (2000-01) Industrial Data Book: 2000-01, New Delhi, Government of India. Centre for Monitoring Indian Economy, (1989-2002), Database, Mumbai, Centre for Monitoring Indian Economy. Davenport R.P., Hines, T., and Judy S. (1992) Glaxo: A History to 1962, Cambridge University Press. Department of Commercial Intelligence & Statistics (1924, 1929, 1931, 1939, 1941, and 1951) Report on Joint Stock Companies, 1928-29, New Delhi, Government of India. 10. 11. 12. Encarnation, D. (1989) Dislodging Multinationals, Indias Strategy in Comparative Perspective, Cornell University Press. Fieldhouse, D.K. (1978) Unilever Overseas, The Anatomy of a Multinational 18951965, London: The Hoover Institution Press. Five Year Plans, Planning Commision, GOI, (online), (cited 30th September, 2004), Available from <URL: http://planningcommission.nic.in/plans/planrel/fiveyr/welcome.html> 13. 14. Ganesh, S. (1997) Who is afraid of Foreign Firms? Current Trends in FDI in India Economic and Political Weekly, May 31. Hunter, J.B.K and Keir, D., (unpublished, 1969) Manuscript of the Coats History.

15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

India Investment Center, (online), (cited March, 2000). http://www.iic.nic.in>

Available from <URL:

India Investment Center, (1967-1990), Foreign Business Investments in India, Monthly Newsletter, New Delhi, India Investment Center, Government of India India Investment Center, (2003), Net Flow of FDI to India, 1991-2002, (online), (cited November 19, 2003), Available from <URL:http://www.iic.nic.in> India Investment Center (1991-2000), FDI Data: 1991-2000, New Delhi, Government of India. India Investment Center, (2000) Foreign Direct Investment approved by the Government of India, 1990-2000, New Delhi, Government of India. International Investment Position of India, (online), (cited November 13, 2003), Available from <URL:http://www.finmin.nic.in> Jones, G. (1996) The Evolution of International Business: An introduction, London & New York, Routledge. Kidron, M. (1965) Foreign Investments in India, London, Oxford University Press. Kurian, M. K. (1966) Impact of Foreign Capital on Indian Economy, New Delhi, Peoples Publishing House Private Limited. Ministry of Finance, Government of India, (online), Sectoral distribution of FDI, (cited November, 2003), Available from <URL:http://www.finmin.nic.in> Reserve Bank of India (1976, 1977, 1978, 1981, 1985, 1991), Annual Reports, Bombay, Government of India. Reserve Bank of India, (online), (cited January, 2000). http://www.rbi.org.in Reserve Bank of India, (2003) Government of India, (online), (cited November 17, 2003) Available from <URL:http://www.rbi.org.in> Tomlinson B.R. (1989) British Business in India, 1860-1970 in Davenport, R.P., Hines, T. and Jones, G. (eds), British Business in Asia since 1860, New York, Cambridge University Press. Available from <URL:

29.

U.S. Department of Commerce(1961), Investment in India: Basic Information for United States Businessmen, 1961, Washington, Government of United States of America.

29

30. 31. 32. 33.

Wilkins, M. (1994) Comparative Hosts, Jones, G. (eds) The Making of Global Enterprise, London: Frank Cass and Company Limited. Hines, T. and Jones, G. (1989), British Business in Asia since 1860, New York, Cambridge University Press. Industrial Data Book (1986), India Investment Centre, Government of India, New Delhi. Industrial Data Book (2000-2001), India Investment Centre, Government of India, New Delhi.

30

APPENDICES

31

Table A1: Joint-Stock Companies Registered, 1911

Name of Managing Agents / Secretary Andrew Yule & Co. Begg, Dunlop & Co. Bird & Co. Shaw Wallace & Co. Williamson, Magor & Co. George, Henderson & Co. Planter's Stores & Agency Kilburn & Co. Octavius Steel & Co. Gillanders, Arbuthnot & co Kettlewell, Bullen & Co. J. Mackillican & Co. C.A. Stewart Duncan Bros. Davenport & Co. Hoare, Miller & Co. Jardine, Skinner & Co. McLeod & Co. Barry & Co. Macneill & Co. H.V. Low & Co. F.W. Heilgers & Co. Stanley, Oaks & Co. Apcar & Co. Anderson Wright & Co. Ernsthausen Ltd. Balmer Lawrie & Co. Martin & Co. Lyall, Marshall & Co. N.C. Sircar & Sons Total Number of joint-stock companies held Tea 10 10 2 10 2 1 6 10 1 1 2 4 12 8 1 2 3 3 88 Coal 11 11 11 5 2 2 3 2 5 5 4 7 1 2 1 4 3 1 7 87 Jute 6 2 8 1 1 2 2 1 2 1 1 2 29 Total 27 12 19 13 15 2 1 8 12 2 2 2 4 12 8 4 6 10 4 5 4 9 1 1 3 3 4 3 1 7 204

Source: Bagchi, A.K., (1972)

32

Table A2: UK Companies with Investment in India

Year of Investment 1767 1843 1876 1911 1911 1918 1920 1921 1921 1924 1924 1926 1929 1930 1931 1931 1933 1933 1933 1934 1934 1935 1935 1936 1936 1937 1947 1947 1948 1948 1948 1949 1951 1953 1956 1958 1961 1961 1963 1974 1984 1985 Parent company Forbes Gokak Parry & Company Binny & Company ITC GEC Associated Biscuits Burmah Oil Co. Burner Mond & Co. Ingersoll & Rand Ltd H.J. Foster & Co. Glaxo Industries Joseph Nathan & Co ICI VST GKN Lever Brothers United Traders Lever Brothers Metal Box Turner Newall Eveready Industries BOC J & P Coats Godfrey Philips Dunlop ICI Chloride (India) Crompton Greeves British Leyland Cadbury Rallis Ltd TI Reckitt & Coleman ICI Unilever Horlicks Ltd ICI Lucas B P L(Instruments) J&P Coats Beecham SBG International Indian Company Forbes Gokak Parry & Company Binny & Company ITC Limited GEC (India) Britanica Biscuits Tinplate Co. (India) Burner Mond & Co.(India) Ingersoll & Rand (India) Ltd H.J. Foster & Co. Glaxo(I) Ltd Joseph Nathan & Co. ICI (India) VST Industries Guest, Keen, Williams Hindustan Vanaspati Mfg. Co United Traders Lever Brothers India Ltd Metal Box (India) Asbestos Cement Eveready Industries India Ltd Indian Oxygen Acme Thread Company Limited Godgfrey Philips (India) Dunlop (India) Alkali & Chemicals Corporation Chloride Crompton Greeves Ltd Ashok Leyland Cadbury India Ltd. Rallis India Ltd. Tube Investment (India) Reckitt & Coleman of India Ltd Indian Explosives Hindustan Lever Ltd Hindustan Milk Food Manufacturers Chemicals & Fibres Lucas-TVS BPL India Madura Coats Eskaylab BSL India(SBG India Ltd)

Source: Compiled from Bagchi (1972), Tomlinson (1989), Hines and Jones (1989), and Individual Company History

33

Table A3: European Companies with Investments in India

Year of Investment 1944 1956 1957 1957 1971 Parent company GERMANY Knoll, AG Indian Company

Knoll Pharmaceuticals Ltd (Now Abbot Laboratories) Hoechst Marion Russel Ltd Hoechst Marion Russef Ltd BASF, AG Bayer(India) Ltd Seimens Siemens India Ltd Continental, AG Modi Rubber Ltd SWITZERLAND Nestle Clariant Secheron Ltd Heinrich Schmid, AG SWEDEN Swedish Match AB Swedish Match AB Swedish Match AB Eiectrolux

1959 1962 1964 1974

Nestle India Ltd ClariantO) India Emco Transformers IFB Industries Ltd (Indian Fire Blank Ltd.)

1923 1937 1961 1960 1964 2001 2001

Electro lux Eiectrolux ITALY

Wimco Ltd Vulcan Trading Co. A If a Lava I Whirpool of India Ltd SKF Bearing India Ltd (Associated Bearing Co. Ltd.) Eiectrolux Kelvinator Intron Ltd

1972

Piaggio FINLAND Watsila Oy HOLLAND Phiips

LML Ltd.

1968

Watsila NSD India Ltd

1930 1979 1993

Philips Electricals (Co.) Ltd Philips India Pvt. Ltd Philips India Pvt. Ltd

1959

POLAND Ursus

Escorts Ltd.

Source: Compiled from individual company history and individual company homepages

34

Table A4: US Companies with Investment in India

Year of Investment 1910s 1928 1930 1937 1950 1950 1951 1951 1956 1958 1960 1962 1963 1967 1979 1985 1987 1989 1995 1995 Parent company Indian Company

Ludlow Jute Company Ludlow Jute Company General Motors General Motors Ford Motors Ford Motors Colgate-Palmolive Colgate-Palmolive(India) Ltd Pfizer Dumex Pvt Ltd Coke Coke Vicks Product Inc. Vicks Product Inc. IBM IBM, India Pepsi Pepsi Park-Davis Park-Davis(India) Ltd. Kelvinator International Co. Whirpool of India Ltd Cummins Cummins India Ltd Mansfield Tire & Rubber Co. MRF Ltd E. Merck E Merck (India) Ltd Castrol Castrol India Ltd Proctor & Gamble P&G, India (by acquiring Richardson Vicks Inc.) Timken Inc. Tata Timken Hewlett Packard Hewlwtt Packard, India Ford Motor Co. Ford, India Genera! Motors General Motors India Ltd

Source: Compiled from individual Company History and individual Company Homepage

35

Table A5: Japan's total Raw Cotton Imports vis--vis Imports from India
World Year
1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942

India Unit Quantity Price

0.42 0.4 0.28 0.2 0.26 0.36 0.4 0.44 0.42 0.46 0.35 0.35 0.49 0.5 0.83 613,857 634,863 630,059 641,100 365,312 530,304 772,318 694,805 836,926 935,498 412,811 448,320 312,358 283,937 2,910

Quantity
1,302,023 1,438,610 1,276,421 1,487,577 1,698,688 1,665,277 1,807,314 1,637,832 2,028,156 1,835,322 1,259,461 1,335,127 1,026,248 785,892 269,375

Value
549,942 573,016 362,047 296,273 447,401 604,847 731,423 714,262 850,451 851,163 436,835 462,007 504,072 391,783 224,306

Value
232,267 231,108 147,038 113,262 91,747 163,797 252,435 259,037 315,061 363,635 113,331 120,997 115,374 94,064 1,574

Unit Price
0.38 0.36 0.23 0.18 0.25 0.31 0.33 0.37 0.38 0.39 0.27 0.27 0.37 0.33 0.54

% from India
47 44 49 43 22 32 43 42 41 51 33 34 30 36 1

Source: All Japan Cotton Spinners Association, (1949)

36

Table A6: Japan's total Exports of Cotton Yarn vis--vis Exports to India
World Year
1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942

India Unit Price

0.97 1.32 1.27 0.69 0.73 0.79 1.01 0.99 0.86 0.82 0.9 0.99 0.63 0.67 0.6 0.81 0.91 0.93 0.87 1.06 0.93 0.86 0.95 1.17 1.97

Quantity
168,605,067 92,134,800 121,970,000 116,904,400 157,624,800 99,329,867 108,144,267 124,321,067 82,220,400 47,062,400 28,662,400 26,960,667 23,846,400 12,690,267 35,842,133 19,322,133 25,937,733 38,633,200 44,209,733 51,892,267 42,106,000 82,838,339 60,950,331 45,100,000 2,943,560

Value
162,789,759 121,636,927 154,981,805 80,563,002 114,723,255 78,511,961 109,610,952 123,116,965 70,716,335 38,794,408 25,894,905 26,755,702 15,032,819 8,510,607 21,546,681 15,712,038 23,484,585 35,873,277 38,344,845 54,905,696 39,355,054 71,089,521 57,975,942 52,973,763 5,789,137

Quantity
31,770,667 1,901,200 19,016,133 14,865,600 27,327,867 23,574,934 32,336,133 34,863,667 23,913,333 21,895,200 6,991,099 11,055,600 8,015,733 6,479,467 20,313,133 7,372,800 9,727,333 17,953,133 16,870,400 14,754,233 18,823,899 23,430,957 12,795,151 5,493,100 -

Value
34,998,715 2,930,475 30,252,515 11,991,354 20,666,783 20,511,834 35,954,637 33,716,812 23,086,163 20,010,131 9,131,071 13,443,308 6,576,936 5,592,234 14,343,000 7,605,372 11,111,917 20,093,092 18,050,783 19,845,595 29,591,750 23,953,631 16,017,440 9,590,522 -

% From Unit Price India

1.1 1.54 1.59 0.81 0.76 0.87 1.11 0.97 0.97 0.91 1.31 1.22 0.82 0.86 0.71 1.03 1.14 1.12 1.07 1.35 1.57 1.02 1.25 1.75 19 2 16 13 17 24 30 28 29 47 24 41 34 51 57 38 38 46 38 28 45 28 21 12 -

Source: All Japan Cotton Spinners Association (1949)

37

Table A7: Number of Foreign Companies registered in India, 1901 2000

Period 1901 - 1918 1919 - 1942 1943 - 1961 1962 - 1977 1978 - 1990 1991 - 2000

Number of Foreign companies registered in India 7 30 72 62 128 145

Source: Centre for Monitoring Indian Economy (1989-2002)

38

Table A8: US Companies with Investments in India, 1961

United States Firms Abbot Universal Ltd. American Cynamid Company American Home Products Corp. Indian Subsidiary of Affiliate

Abbot Laboratories(India) Pvt. Ltd Lederle Laboratories (India) Pvt. Ltd. John Wyeth & Brothers, Ltd., Steelcrete House Wyeth (India) Pvt. Ltd., Steelcrete House Californai Texas Oil Company Caltex Oil Refining (India), Limited Caltex Corporation Caltex (India), Limited The Carborabdum Company Carborandum Universal Ltd Colgate-Palmolive Company Colgate-Palmolive (India) Ltd Corn Products Refining Company Corn Product Company (India) Pvt. Ltd Dayton Rubber Company Premier Tyres, Ltd Dorr-Oliver, Inc. Dorr-Oliver (India) Ltd. Dow Chemical Company Polychem, Ltd The Firestone Tire and Rubber Co. The Firestone Tire & Rubber Co. of India Pvt Ltd Synthetics & Chemicals Ltd Good Year Tire & Rubber Co. Good Year Tire & Rubber Co. of India Pvt Ltd Johnson & Johnson IncJohnson & Johnson (Great Britain) Ltd. Kaiser Aluminium & Chemical Corp Hindustan Aluminium Corp. Ltd Kaiser Engineering Overseas Corp Mysore Cements, Ltd Mr. F. S. Kerr F. S. Kerr & Co. Pvt Ltd Cochin Company Ludlow Jute Company Ludlow Jute Company Ltd Par, Davis & Company Ltd Par, Davis & Company Ltd Parsons & Whittemore South Asia Co, Inc. Mandya National Paper Mills Ltd Seshasayee Paper & Boards Ltd Philips Petroleum Company Phillips Carbon Black, Ltd Radio Corporation of America Photophones Equipment Pvt Ltd Remington Rand Division Remington Rand of India Ltd Standard Vacuum Oil Company Standard Vacuum Oil Company Steel Improvement Forge Co. Republic Forge Co. Ltd Union Carbide Corporation Union Carbide (India) Ltd Von Kohorn International Corp. India Rayon Corporation Ltd Westrex Corporation Westrex Company (India) American Express Company, Inc. American Express Company, Inc. AmerinTrading Companies Malabar Fisheries Corporation Geophysical Service Inc. Geophysical Service International, S.AIBM World Trade Corporation IBM World Trade Corporation Otis Elevator Company Otis Elevator Company India Pvt Ltd Willey's Overland Export Corporation Mahindra & Mahindra Ltd Source: U.S. Department of Commerce, 1961 39

Table A9: US Companies with Licensing or other Agreements with Indian Firms, 1961
United States Firm American Chemical Paint Company Bahnson Company Bancroft, Jos., and Sons Company Bogen, David, Company Inc Buell Engineering Company Inc Burgess Battery Company Bush Manufacturing Company Byron Jackson Pumps Inc Carrier Corporation Chrysler Corporation dark Electronic Laboratories Cluett-Peabody & Co. Inc Indian Firm Imperial Chemical Industries (India) Ltd C- Doctor and Company Pvt. Ltd Standard Mills Company Ltd Electronic Limited Associated Cement Companies Ltd Estrela Batteries Ltd American Refrigerator Company Greeves Cooton & Company Ltd Voltas Ltd Premier Automobiles Ltd Automatic Electric Devices Co. Ltd Serampur Cotton Mills Ltd Kohinoor Mills Ltd New Sharrock Spinning & Mfg. Company Ltd New Commercial Mills Company Standard Mills Ltd Vijay Mills Company Ltd Elgin Mills Company Ltd Vikram Mills Ltd Rustom Jehangir Vakil Mills Company Ltd Bombay Dyeing & Mgf Co. Ltd Gaekwar Mills Ltd Shriram Ambica Mills Ltd Buckingham & Garnatic Spinning & Weaving Mills Ltd Colgate-Palmolive (India) Pvt Ltd Textile Machinery Corporation Ltd Geoffrey Manners & Company Pvt. Ltd Tata Hydro-Electric Company Ltd Governor of Rajasthan Automobile Products of India Ltd Amco Batteries Ltd Tata Iron & Steel Company Ltd Tata Iron & Steel Company Ltd Tata Iron & Steel Company Ltd Damodar Valley Corporation Addition Paints & Chemicals-Pvt Ltd National Rayon Corporation Ltd Patel (India) Ltd National Rayon Corporation Ltd Swastic Oil Mill Ltd Sarabhai Chemicals Ltd Hindustan Motors Ltd Electronics Limited American Products Company Ltd Mercantile & Industrial Development Company Ltd Mahindra & Mahlndra Ltd Geoffrey Manners & Company Pvt. Ltd

Colgate-Pa I motive Company Combustion Engineering Inc. Davis & Lawrence Company Ebasco Services Inc. The English Mica Company Firestone Tire & Rubber Co. Gould-National Batteries Inc. Hackett Brass Foundry Kinney, S.P. Engineers Inc. Koppers Company Inc. Kullian Corporation Nielson Chemical Company Rayon Consultants Inc. Sawyer's Inc. Skonandoa Rayon Corporation Snell, Foster D. Inc. Squibb, E.R. and Sons Studebaker Packard Corporation United States Air Conditioning Corp United States Vitamin Corp Wayne Pump Company Willys Motors Ltd Zonite Products Ltd

Source: U.S. Department of Commerce, 1961

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Table A10: US Companies with Investments in India, 1961

(Primarily in Office Equipment. Stores. Stocks, and Spare Parts) United States Firms Indian Subsidiaries or Affiliates American Bureau of Shipping American Bureau of Shipping American Export Lines Inc. American Export Lines Inc. American Foreign Insurance Association American Foreign Insurance Association American International Underwriters Corp. American International Underwriters (India) Pvt. Ltd Armco International Corp. Armco (India) Pvt. Ltd Associated Press Associated Press of America Chase Manhattan Bank Chase Manhattan Bank Chesebrough-Pond's Inc. Chesebrough-Pond's Inc. Coca-Cola Export Corporation Coca-Cola Export Corporation Columbia Broadcasting System Columbia Broadcasting System Columbia Pictures Intrl. Corp. Columbia Films of India Ltd The ChicagoPneumatic Tool Company Consolidated Pneumatic Tool Company Ltd Dodge & Seymor Ltd Dodge & Seymor (India) Pvt Ltd Eli Lilly Intrernational Corp. Eli Lilly and Company of India, Inc. First National City Bank of New York First National City Bank of New York Gerdau India Corporation Gerdau India Corporation Getz Brothers & Company Getz Brothers & Company Grant Advertising Inc Grant Advertising Inc Gulf Oil Corporation Gulf Oil (India) Ltd International Business Consultants Ltd Iboon Private Ltd Indamer Company Pvt Ltd. Indamer Company Pvt Ltd Ingersoli-Rand Company Ingersoli-Rand (India) Pvt Ltd International Chemical Company Inc. International Chemical Company Ltd. International General Electric Company International General Electric Co. (India) Pvt Ltd Isthmian Lines Inc Isthmian Steamship Company Kuljian Corporation Kuljian Corporation Loew's International Corporation Metro-GoIdwyn-Mayer India Ltd Loew's International Corporation Metro Theatre Bombay Ltd McGraw-Hill International Corporation McGraw-Hill International Corporation Monsanto Chemical Company Monsanto Chemical Company Muller & Phipps (Asia) Ltd Muller & Phipps (India) Pvt. Ltd National Cash Register Company Picker International Corporation Pan American World Airways Inc Pan American World Airways Inc Paramount International Films Inc Paramount Films of India Ltd Ralph M. Parson Company Ralph M. Parson Company Pepsi-Cola Pepsi-Cola Picker X-Ray Corporation Picker International Corporation RKO Radio Pictures RKO Radio Pictures (Private) Ltd Republic Pictures International Corp Republic Pictures of India Ltd Edward T. Robertson and Sons Edward T. Robertson and Sons

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L D Seymour & Company Inc Singer Sewing Machine Company The Stanley Works J- Walter Thompson Far Eastern Co. Trans World Airlines Inc 20th Century-Fox Intrl. Corp. United Artists Corporation Universal Pictures Co. Inc. (Production) Van Reekum-Gepacy Paper Inc. Warner Brothers Westinghouse Trading (Asia) Ltd

L D Seymour & Company (India) Pvt Ltd Singer Sewing Machine Company The Stanley Works J. Walter Thompson Company Pvt Ltd Trans World Airlines Inc 20th Century-Fox Corp. (India) Pvt Ltd United Press Association Universal Pictures India Pvt Ltd Van Reekum-Gepacy Paper Pvt Ltd Warner Brothers, First National Pictures Inc. Westinghouse Trading Company (Asia) Ltd

Source: U.S. Department of Commerce, 1961

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Table A12: Sectorwise FDI in India, during 1948--2000

Year

1921

1938

1948

1955

1960

1991

2000

Manufacturing

12

11

36

51

59

88

88

Non Manufacturing

88

89

64

41

41

12

12

Source: Compiled from (a) Tomlinson (1989), (b) Kurian (1966), (c) Ganesh (1997), (d) India Investment Center (2003), (e) Center for Industrial & Economic Research (1986, 2000-01), (f) International Investment Position of India (2003), and (g) Ministry of Finance (2003), Government of India.

Table A13: Total Amount of FDI in India, 1921-2000

Year 1921 1921 - 1938 1949 - 1961 1962 - 1968 1970 - 1979 1980 - 1990 1991 - 2000 Amount of FDI (in Billion INR) 2.03 0.32 3.55 2.20 3.53 11.5 2474

Sources: Compiled from Tomlinson (1989), Wilkins (1994), India Investment Center(196770. 1991-2000), Kurian (1996), Industrial Data Book (1986), Industrial Data Book (200001). Please Note: The amount for the period 1991-2002 is the amount approved by the Government of India and not the actual amount invested in India

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Table A14: Countrywise Amount of FDI in India: 1949 2000 (In million INR)
Year
1949* 1950* 1951* 1952* 1953* 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

UK
240.8 240.8 240.8 240.8 240.8 252.0 252.0 157.0 63.0 0.0 1.0 427.0 163.7 163.7 163.7 163.7 314.0 94.0 956.0 0.0 241.0 241.0 16.6 10.8 1.2 5.2 1.5 5.6 6.7 5.0 14.8 9.7 9.7 7.1 16.5 98.0 18.1 37.0 77.0 85.0 139.0 335.0 91.0

USA
37.8 37.8 37.8 37.8 37.8 49.0 49.0 71.0 105.0 25.0 76.0 50.0 286.3 286.3 286.3 286.3 522.0 286.0 1283.0 472.0 331.0 331.0 15.8 40.9 12.0 19.4 12.0 44.7 18.2 47.3 22.2 21.7 22.0 22.5 50.3 138.9 89.5 400.0 294.0 295.0 970.0 622.0 345.0

Germany
0.0 0.0 0.0 0.0 0.0 12.0 12.0 3.0 7.0 3.0 16.0 14.0 42.75 42.75 42.75 42.75 82.0 75.0 450.0 156.0 112.8 112.8 11.4 1.1 7.0 6.0 6.9 9.8 7.5 8.6 4.4 4.7 4.7 54.2 35.3 48.4 28.4 118.0 202.0 99.0 310.0 1203.0 195.0

Japan
0.0 0.0 0.0 0.0 0.0 0.5 0.5 0.0 4.0 0.0 0.0 8.0 71.75 71.75 71.75 71.75 72.0 49.0 232.0 171.0 58.1 58.1 3.7 0.2 3.3 4.7 1.3 0.0 0.0 1.3 0.0 17.0 10.2 6.5 251.1 160.8 61.5 157.0 56.0 69.0 174.0 88.0 50.0

Others
n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a 564.5 564.5 564.5 564.5 83.0 178.0 1045.0 163.0 263.6 263.6 10.9 9.2 4.8 32.0 10.1 12.6 7.7 32.0 15.0 35.2 42.4 18.7 274.8 172.9 932.5 495.0 441.0 529.0 805.0 919.0 602.0

Total
278.6 278.6 278.6 278.6 278.6 313.5 313.5 231.0 179.0 28.0 93.0 499.0 1091.3 1091.3 1091.3 1091.3 1073.0 682.0 3966.0 769.0 1007.1 1007.1 58.4 62.3 28.2 67.1 31.8 72.7 40.0 94.1 56.4 88.3 89.0 109.0 628.0 619.0 1130.0 1207.0 1070.0 1077.0 2398.0 3167.0 1283.0

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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

313.0 1177.0 6227.0 12991.0 17259.0 15246.0 44907.0 32008.0 29630.0 4121.0

1749.0 11383.0 34730.0 34881.0 70448.0 100549.0 135698.0 35619.0 35755.0 41398.0

376.0 965.0 1754.0 5694.0 13395.0 15375.0 21548.0 8538.0 11430.0 5938.0

520.0 6102.0 2574.0 4009.0 15143.0 14882.0 19064.0 12828.0 15947.0 8275.0

2207.0 18388.0 43333.0 84298.0 208579.0 215447.0 327687.0 218642.0 190903.0 313990.0

5165.0 38015.0 88618.0 141873.0 324824.0 361499.0 548904.0 307635.0 283665.0 373722.0

Source: Center for Industrial Economic Research, (1986 & 2001), Industrial Data Book (1986), Industrial Data Book (2000-01), (1991-2000), Indian Investment Center, (19671990), and India Investment Center (1991-2000). Please Note: 1. The amount for the years with * mark are average figures 2. The amounts for the period 1991 2002 are amounts approved by GOI and not the actual amount of invested in India.

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Table A15: Countrywise Number of Foreign Collaborations in India, 1951 2000

Year 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 U.K. 17 19 29 31 30 39 57 75 160 161 226 141 118 143 108 44 50 19 34 39 55 38 53 59 54 54 59 61 63 110 80 105 119 123 149 134 130 142 78 107 U.S.A 12 9 7 14 15 16 19 29 58 93 108 103 110 112 65 42 34 36 18 33 43 62 48 79 55 69 54 58 48 125 85 109 135 143 229 203 217 200 137 142 46 Germany 3 1 4 5 11 7 15 21 61 73 85 54 59 80 60 41 24 22 28 36 42 49 60 68 59 58 55 58 54 100 74 110 129 132 187 188 154 179 114 141 Japan 2 2 1 0 2 6 4 6 15 50 45 29 44 37 31 18 21 12 17 15 35 27 36 28 23 10 20 28 12 34 27 51 58 78 111 111 82 98 63 55 Others n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a 10 1 5 3 0 2 0 2 0 1 1 2 3 6 1 1 102 90 157 123 213 232 264 365 324 320 338 247 258 Total 34 31 41 50 58 68 95 131 377 464 337 337 332 377 267 145 131 89 99 123 176 177 199 237 197 192 189 307 267 526 389 588 673 740 1041 960 903 957 639 703

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

140 183 175 199 202 205 191 164 194 166

174 344 318 360 491 434 451 390 488 509

167 199 177 216 256 256 257 198 218 198

74 101 95 134 147 160 156 143 158 111

421 693 711 945 1241 1248 1270 891 1166 1160

976 1520 1476 1854 2337 2303 2325 1786 2224 2144

Source: Center for Industrial Economic Research (1986 & 2001), Industrial Data Book (1986), Industrial Data Book (2000-01), Indian Investment Center (1967-1990), and India Investment Center (1991-2000) Please Note: The figures for the period 1991 2002 are numbers approved by the Government of India and not the actual number of collaborations.

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