IMPACT OF FOREIGN DIRECT INVESTMENT ON INDIAN ECONOMY: A CRTICAL ANALYSIS (By- Neha Bhuraney)
The study of FDI
in India concludes that India should welcome FDI as it has huge benefits for
the Indian economy. FDI participation always brings prosperity for any emerging
country. Various benefits which India can entice by liberalising FDI are use of
advanced technology, expertise, better infrastructural developments, widened
product basket, improving standard of living, uplifting the brand quality,
improving competitiveness, better foreign relations, boosting exports, and
providing India with a global platform. The debated views of FDI in multi brand
have certainly hindered the flow in retailing. However, the government has
tried to encounter all the obstructions and ease the investment norms for
foreign investors. As the analysis shows that India will have an upward trend
in FDI flow for next 5 years, yet the government should revise its regulations
under FEMA, to watch the barriers and protect the domestic companies and equity
holders.
FDI though being
beneficial and having an increasing trend always brings huge threat for
domestic and small scale companies and retailers. India should formulate
policies which will diverse the threats and channel the benefits, so that the
economy may prosper globally FDI always faces problems in form of red-tapism,
bureaucracy, lobbying, non-availability of credits, and rigid taxation
policies. India has tried to assist FDI by allowing low corporate tax, tax
holidays, preferential tariffs, removing the sectorial caps, removing
restrictions of customs, lowering the depreciation rate, etc. Being politically
controversial, FDI has to be accepted in India, to overstep the sluggish
growth. As FDI will always provide long term benefits, the public should hold
their patience to en-cash them, and utilise it for their profit.
FDI as a
strategic component of investment is needed by India for its sustained economic
growth and development through creation of jobs, expansion of existing
manufacturing industries, short and long term project in the field of
healthcare, education, Research and Development (R&D), etc. Government
should design the FDI policy such a way where FDI inflow can be utilized as
means of enhancing domestic production, savings and exports through the
equitable distribution among states by providing much freedom to states, so
that they can attract FDI inflows at their own level. Therefore for further
opening up of the Indian economy, it is advisable to open up the
export-oriented sectors and higher growth of the economy could be achieved
through the growth of these sectors.
Today foreign
inflow is considered anon debt external resource to supplement inadequate
savings and a tool in transforming technology, improving managerial skills and
facilitating market development. In our recent economic system capital is the
fuel that generates the profits. Keeping in the above things in mind an attempt
is being made to order some suggestions to increase inflows:-
o
To companies for an investment, there is a need
to extend a hospitable environment for foreign
investor by providing essential guarantee for investors to A) enter and
exit B) operate on equal terms alongside local operators and C) repatriate
their investment when needed.
o
India can take advantage of its low labour cost
and attractive investments. However the low costs need not necessarily equate
with productivity. Thus, importance must be on rational labour policies, which
protect the interest of both workers and employers through fair labour
practices and arbitration.
o
Continued export growth and careful management
of India’s import will also be crucial in maintaining India’s ability to
maintain and continue to build international equity and debt institutional
investor’s confidence.
o
The large availability of required
infrastructure in the form of serviceable roads, ports, telecommunication, air
ports, water and power facilities in pre-requisite for attracting large volume
of foreign investors.
o
Domestic policy reforms in power sector, urban
infrastructure and real estates.
o
SSI reservations should be phased out as quickly
as possible.
o
Simplification of application laws, rules, and
administrative procedures and reducing red tapism.