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.