Impact of FDI in Indian

economy

Authors
Sanjay L.A , Chandrasekhar,
Faculty of SJBCMS college of Management studies
HARISH
Student of KLE college of Management studies
Meaning of FDI

Foreign direct investment (FDI) is an investment made by a company or individual

one country in business interests in another country, in the form of either
establishing business operations or acquiring business assets in the other country,
such as ownership or controlling interest in a foreign company.

Introduction
Foreign companies invest in India to take advantage of relatively lower wages, special
investment privileges such as tax exemptions, etc. For a country where foreign
investments are being made, it also means achieving technical know-how and
generating employment.
The Indian government’s favorable policy regime and robust business environment
have ensured that foreign capital keeps flowing into the country.
The government has taken many initiatives in recent years such as relaxing FDI norms
across sectors such as defense, PSU oil refineries, telecom, power exchanges, and
stock exchanges, among others.
• The industrial policy of 1965, allowed MNCs to venture through technical
collaboration in India. Therefore, the government adopted a liberal attitude by
allowing more frequent equity.
• India has already marked its presence as one of the fastest growing economies of
the world. It has been ranked among the top 10 attractive destinations for inbound
investments. Since 1991, the regulatory environment in terms of foreign investment
has been consistently eased to make it investor-friendly.
Some of the recent significant FDI
announcements are as follows
Recent policy initiatives
The Ministry of Home Affairs has finally given the approval to the proposal of
allowing FDI in railways. The Cabinet Committee on Economic Affairs
(CCEA) is expected to consider the proposal. Foreign investors can invest
only in construction and maintenance of railway projects, and not in
operations. And so on

Current Challenges and Improvement Areas

1. India is definitely a lucrative place for FDI, but there are certainly some challenges
and areas for improvement still present. Until, these areas are honed to perfection,
India will not become the number one place for FDI.
2. India is focusing on maximizing political and social stability along with a
regulatory environment
3. The obvious advantages of FDIs, there are quite a few challenges facing larger
FDIs in India, such as: • Resource challenge: India is known to have huge amounts
of resources.
Foreign Direct Investment: Impact on Indian Economy
• Equity challenge
• Political Challenge
• Federal Challenge

Conclusion
India’s Foreign Direct Investment (FDI) policy has been gradually liberalized to make
the market more investor friendly. The results have been encouraging. These days,
the country is consistently ranked among the top three global investment
destinations by all international bodies, including the World Bank, according to a
United Nations (UN) report. For Indian economy which has tremendous potential,
FDI has had a positive impact. FDI inflow supplements domestic capital, as well as
technology and skills of existing companies. It also helps to establish new
companies. All of these contribute to economic growth of the Indian Economy .
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