Foreign Direct Investment(FDI) is a vital ingredient of the globalization efforts of the world economy. The impact of FDI on India has left an impression. The growth of international production is driven by economic and technological forces. It is also driven by the ongoing liberalization of FDI and trade policies. One outstanding feature of the present-day world has been the circulation of private capital flow in the form of FDI in developing countries, especially since 1990s. Since the 1980s, multinational corporations (MNCs) have come out as major actors in the globalization context. Governments around the world – in both advanced and developing countries – have been attracting MNCs to come to the respective countries with their FDI. This experience may be related to the broader context of liberalization in which most developing and transition countries have moved to market-oriented strategies. In this context, globalization offers an unparalleled opportunity for developing countries like India to attain quicker economic growth through trade and investment.
In the period 1970s, international trade grew more rapidly than FDI, and thus international trade was by far than most other important international economic activities. This situation changed radically in the middle of the 1980s, when world FDI started to increase sharply. In this period, the world FDI has increased its importance by transferring technologies and establishing marketing and procuring networks for efficient production and sales internationally (Shujiro Urata, 1998).
But now-a-days, it seems that impact of FDI on India is a negative one. From a position of 8th rank in 2009 India has fallen to 14th position as country attracting largest FDI, according to “World Investment Report 2011” by United Nations Conference on Trade and Development (UNCTAD). Developing countries lik Singapore, Thailand, Taiwan, Malaysia etc. are attracting a higher FDI inflow than India. A number of studies and reports highlight the weakness of India as a falling FDI destination. In the latest study from World Bank “Ease of Doing Business in India 2011” India is ranked as 134 out of 183 countries. GD on impact of FDI on India can have different faces.
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