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WORKING TITLE:-

A Study on the Impact of FDI Inflows on Indian Economy.

BACKGROUND OF THE RESEARCH:-

This section reviews the empirical studies on the relation between FDI and economic

activities in the host economy, which could facilitate in identifying the issues relating to the

impact of FDI at the sectoral level. In the earlier stage, few studies had shown that FDI has a

negative impact on the growth of the developing countries. The main argument of these

studies was that FDI flows to Less Developing Countries (LDCs) were mainly directed

towards the primary sector, which basically promoted the less market value of this sector.

Since these primary products are exported to the developed countries and are processed for

import, it receives a lower price for its primary product. This could create a base for the

negative impact of FDI flows in the economy.

INDIA ranks second in the world in terms of financial attractiveness, people

and skills availability and business environment. This is revealed in AT Kearney's 2007

Global Services Location Index. Country's financial stability in the current environment of

financial turbulence and a possible unwinding of macro imbalances sends clear message to

the prospective foreign investors about India's position as an expanding investmentdestination. "India's external sector has displayed considerable strength and resilience since

the reforms in 1991- despite several domestic as well as global political events and supply

shocks in food and fuel........we partner with the global economy fully on the trade and

current account while there is progressive liberalization of the capital account, consistent with

the progress in reforms in the real, fiscal and financial sectors", observed Dr Y.V.Reddy,

Governor of India's central banking authorities, Reserve Bank of India (RBI) at the World

Leaders Forum in New York in April this year. "The strong macro-economic fundamentals,

growing size of the economy and improving investment climate has attracted global

corporation to invest in India. A major outcome of the economic reforms process aimed at

opening up the economy and embracing globalization has led to tremendous increase in

Foreign Direct Investment inflows into India", says country's powerful industry lobby CII.

(Source:-http://www.indiaonestop.com)

India has been growing very fast for last few years and it has shown impressive

development since then. Indias economy has grown by many times since last few decades

http://www.indiaonestop.com/http://www.indiaonestop.com/http://www.indiaonestop.com/http://www.indiaonestop.com/

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and it has become a very attractive destination for FDI. There is much reason for India's

viability as a destination for foreign investment variables including disposable incomes,

emerging middle class, low cost competitive workforce, investment friendly policies and

progressive reform process all contribute towards India being an appropriate choice for

investors and businessmen.

The government of India has put in place a transparent FDI policy. Many initiatives

have been taken to attract FDI in several sectors. Opening of many new sectors to FDI,

raising FDI equity caps in sectors already opened and procedural simplification are major

steps towards increasing FDI. Today, the FDI policy in India is widely imagined to be among

the most liberal in the emerging economies and FDI up to 100% is allowed under the

automatic route in most sectors.

The Indian Government is committed to provide both private and public companies a very

favorable environment to encourage FDI. Government has highly liberalized the foreign

investment regime over the last decade. Today, FDI is allowed in almost all sectors except

for a few sensitive areas such as defense. Also, FDI is allowed in number of sectors under the

automatic route, except a few, for which approval from the Foreign Investment Promotion

Board (FIPB) is required. India's foreign trade policies have been designed with a view to

invite and encourage FDI in India. The process of regulation and approval has been highly

liberalized. The Reserve Bank of India has arranged the governmental and obedience aspects

of FDI.

The country houses 28 states and 7 union territories. These have diverse investment

opportunities and natural resources in them. These are further supported by technological

and infrastructure advancements and supportive government policies. There has emerged a

Competition among states to attract investment in their states and this has proved to be

beneficial for the potential investor. Vast investment potential exists in sectors such asbiotechnology, retail, real estate, roads and highways, power, telecommunications, civil

aviation, special economic zones, healthcare.

AIM:-

To understand and analyze the trend of FDI in India and its impact on Indian

Economy.

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RESEARCH OBJECTIVE:-

1. To determine the various factors that attracts FDIs towards Indian economy.

2. To measure the trends of FDI inflow in Indian.

3. To measure the percentage change in growth of various sector due to inclusion of FDI

in India.

4. To observe the various socio-economic changes in Indian various sector.

HYPOTHESIS:-

Null Hypothesis (H0) :- The FDI doesnt have any impact on Indian economy.

Alternate Hypothesis ( H1):- The FDI has an impact on Indian economy.

RESEARCH METHODOLOGY:-

Stage-1 Sample Design:-

Sample Unit:- Various Industrial sectors in India.

Sample Size:- 10 types of industries.

Sampling Type:- Non probability judgment sampling

Stage-2 Approaches Research Design:-

1. Research Design:

Causal Research

Since it is an investigation into an issue that looks an effect of FDI on Indian

economy. This will assist us in the future business plantings in India

2. Data Collection:-

Secondary sources

3. Statistical tools:-

T-test and ANOVA

4. Data Analysis:-

Tabulation

Interpretation and

Analysis

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Stage-3 Scope of the study:-

This study is helpful to analyze the impact FDI in retail sector in India and to

understand its effect on economic growth of the country.

Stage-3 Limitations of the Study:-

This study is limited to only particular industries in India and it doesnt consider all

the various sectors. Indian has both organized and un-organized sector and the un-organized

sector is as big as organized sector in India. Un-organized sector is independent with FDI. If

there is any chance of flow into un-organized sector it is cumbersome to gather the data from

un-organized sectors. Therefore the research is limited to organized sectors in Indian

economy.

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FDI Inflows financial year wise

Financial Year Total(In US Billion $)

% of Growth in FDI

2000-01 4 ___

2001-02 6.1 53%

2002-03 5 -18%

2003-04 4.3 -14%

2004-05 6.1 42%

2005-06 9 48%

2006-07 22.8 153%

2007-08 34.8 53%

2008-09 37.8 9%

2009-10 37.8 0%

2010-11 25.9 -31%

2011-2012(JAN) 26.19 1%

Total 219.79 --

1 Billion = 1000 Millions

1 Billion = 100 Crores

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0

5

10

15

20

25

30

35

40

FDI TREND

Total ( all sectors)

-50%

0%

50%

100%

150%

200%

% of Growth in FDI YEAR-WISE

% of Growth in FDI ___