PROJECT REPORT

ON

“A study on Foreign Direct Investment in India ”

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Commerce (ACCOUNTING & FINANCE)

Under the Faculty of Commerce

By

Miss. Gausiya. Z. Shaikh

ROLL NO. 21443

UNDER THE GUIDANCE OF

PROF. KARISHMA BHAGCHANDANI

SEVA SADAN COLLEGE OF ARTS, SCIENCE AND COMMERCE

(SEVASADAN MARG, ULHASNAGAR –421 003)

2023-2024
 Certificate

This is to certify that Miss. Gausiya. Z. Shaikh has worked and duly completed his Project Work
for the degree of Bachelor of Commerce (ACCOUNTING & FINANCE) under the Faculty of
Commerce in the subject of TYBAF and his project is entitled, A study on Foreign Direct
Investment in India under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that no
part of it has been submitted previously for any Degree or Diploma of any University.

It is his own work and facts reported by his personal findings and investigations.

Seal
Of
The (Prof. Karishma Bhagchandani)
College
(Name and Signature of the Guiding Teacher)

Date of submission:
Declaration by learner

I the undersigned Miss. Gausiya. Z. Shaikh here by, declare that the work embodied in this project
work titled “A study on Foreign Direct Investment in India” forms my own contribution to the
research work carried out under the guidance of Prof. Karishma Khubchandani’s a result of my
own research work and has not been previously submitted to any other University for any other
Degree/Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly indicated as such
and included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented in
accordance with academic rules and ethical conduct.

(Miss. Gausiya. Z. Shaikh)

(Name and Signature of the Learner)

Certified by

(Prof. Karishma Bhagchandani)

(Name and Signature of the Guiding Teacher)

 Acknowledgement

To list who all have helped me is difficult because they are so numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the
completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my Principal, DR. GULABCHAND GUPTA for providing the necessaryfacilities
required for completion of this project.

I take this opportunity to thank our Coordinator Prof. Karishma Bhagchandani for her moral supportand
guidance

I would also like to express my sincere gratitude towards my project guide Prof. Karishma
Bhagchandani whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various referencebooks
and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of
the project especially my Parents and Peers who supported me throughout my project.
ABSTRACT
Investment is very important for the growth and prosperity of an economy. Domestic investment and foreign
investment both are equally important. Domestic investment may lead to the creation of domestic savings,
consumption, and employment. Foreign Investment can decrease the domestic saving gap. The main
objective of the study is to examine the trends and patterns of foreign direct investment in India. The
descriptive design has been adopted for a study purpose. Secondary data has been used. Statistical tools
ANOVA, average, percentage, and CAGR have been applied. Data has been taken from 2005 to 2017.
Showing the data of total FDI and total foreign investment in India during the period 2005-17, the study
highlights the trends in the aggregate inflow of FDI in India during 2005-2010 and 2010-17. At the overall
level RBI automatic route is found contributing the maximum share of 64.98% to the total FDI inflow.
FDI has a powerful impact not only upon the economy of the investor country, but also upon economic and
social welfare of the host country. The role of FDI has increased considerably in recent years. In fact, FDI
has become an important source of external finance for the developing countries as it not only fulfills the
ever-increasing requirements of various sectors of the economy but also promotes growth, even more
through spillovers of technology, improved innovative capacity, and gives them effective marketing links in
highly competitive world markets. Thus, FDI has become an important mechanism for global economic
integration. This paper focuses on top 5 investing countries in FDI equity inflows in India and top 5 sectors
attracting FDI in India.
 INDEX

SR.NO NAME OF THE CHAPTER PAGE

NO.
Chapter 1 INTRODUCTION 7 - 20
1.1 Backdrop
1.2 Meaning
1.3 Definition
1.4 India Literature Survey
1.5 FDI in India
1.6 Investment Outlook
1.7 FDI Performance and Potential Index
1.8 Global Competitiveness of India’s FDI

1.9 Reforms In The India Economy

1.10 Objectives of the Current Study

1.11 History
1.12 World investment report

Chapter 2 Research Methodology 21 - 37

2.1 Meaning
2.2 Sample Design
2.3 Scope of FDI In India Past and Future
2.4 Need Of FDI In INDIA
2.5 Objective Of FDI
2.6 Types of investment
2.7 Data collection
2.8 Advantages of FDI
2.9 Disadvantages of FDI
2.10 limitations of Foreign Direct Investment (FDI) in India
2.11 The Benefits of Foreign Direct Investment in India
2.12 Assessing the Role of Foreign Direct Investment (FDI)
in India's Economic Development
2.13 Challenges and Considerations
Chapter 3 Literature Review 38
Chapter 4 Data Analysis and Interpretation 39 – 52

4.1 Introduction
4.2 Analysis and Interpretation of Data
Chapter 5 Conclusion and Suggestion 53 - 56

5.1 Conclusion

5.2 Suggestion
BIBLOGRAPHY/WEBLOGRAPHY
ANNEXURE
Chapter 1: Introduction
1.1 Backdrop
Capital formation is an important determinant of economic growth. While domestic investments add to the
capital stock in an economy, foreign direct investment (FDI) plays a complementary role in overall capital
formation by filling the gap between domestic savings and investment. FDI has played an important role in
the process of globalisation during the past two decades. The rapid expansion of FDI by multinational
enterprises (MNEs1) since the mid-eighties may be attributed to significant changes in technologies,
liberalisation of trade and investment regimes, and deregulation and privatisation of markets in many
countries including developing countries like India. Fresh investments, as well as mergers and acquisitions,
(M&A) play an important role in the cross-country movement of FDI. However, various qualitative
differences have been identified between fresh FDI (greenfield FDI) and M&A. An important question that
arises is whether FDI merely acts as filler between domestic savings and investment or whether it serves
other purposes as well. At the macro– level, FDI is a non-debt-creating source of additional external
finances.

This might boost the overall output, employment and exports of an economy. At the micro-level, the effects
of FDI need to be analysed for changes that might occur at the sector-level output, employment and forward
and backward linkages with other sectors of the economy. There are fears that foreign firms might displace
domestic monopolies, and replace these with foreign monopolies which may, in fact, create worse conditions
for consumers. Thus, it is important to have an efficient competition policy along with sector regulators in
place. While the quantity of FDI is important, equally important is the quality of FDI. The major factors that
might provide growth impetus to the host economy include the extent of localisation of the output of the
foreign firm’s plant, its export orientation, the vintage of technology used, the research and development
(R&D) best suited for the host economy, employment generation, inclusion of the poor and rural population
in the resulting benefits, and productivity enhancement.

1.2 MEANING
These three letters stand for foreign direct investment. The simplest explanation of FDI would be a direct
investment by a corporation in a commercial venture in another country. A key to separating this action from
involvement in other ventures in a foreign country is that the business enterprise operates completely outside
the economy of the corporation’s home country. The investing corporation must control 10 percent or more
of the voting power of the new venture.
Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories,
mines and land. Increasing foreign investment can be used as one measure of growing economic
globalization.
For a multinational corporation, FDI in India is a means to access new consumption and production markets,
and thereby expand its influence and business operations. It can gain access not only to limited resources
 such as fossil fuels and precious metals, but
also skilled and unskilled labour, management
expertise and technologies. FDI also enables
and an organisation to lower its cost of
production- by accessing cheaper resources, or
going directly to the sources of raw materials
rather than buying them from third parties.
Often, there are various tax advantages that
accrue to a company undertaking FDI. This can
occur when the home country allows tax
deduction on foreign income, or when the
recipient country allows tax deductions and
benefits for organisation incurring FDI in that
country. Additionally, this can happen when the
recipient country has a more beneficial tax code than the home country.

1.3 DEFINITION

Foreign direct investment is that investment, which is made to serve the business interest of the investor in a
company, which is in a different nation distinct from the investor’s country of origin. A parent business
enterprise and its foreign affiliate are the two sides of the FDI relationship. Together they comprise an MNC.
The parent enterprise through its foreign direct investment effort seeks to exercise substantial control over
the foreign affiliate company. ‘Control’ as defined by the UN, is ownership of greater than or equal to 10%
of ordinary shares or access to voting rights in an incorporated firm. For an unincorporated firm one needs to
consider an equivalent criterion. Ownership share amounting to less than that stated above its termed as
portfolio investment and is not categorized as FDI.
FDI stands for Foreign Direct Investment, a component of a country’s national financial account. Foreign
direct investment is investment of foreign assets into domestic structures, equipment, and organization. It
does not include foreign investment into the stock market. Foreign direct investment is thought to be more
useful to a country than investments in the equity of its companies because equity investments are potentially
“ hot money” which can leave at the first sign of trouble, where FDI is durable and generally useful whether
things go well or badly.
FDI or foreign Direct Investment is any form of investment that earns interest in enterprises which function
outside of the domestic territory of the investor. FDIs requires a business relationship between a parent
company and its foreign subsidiary. Foreign direct business relationship give rise to multinational
corporation. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the
ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting
power in a business enterprise operating in a foreign country.

1.4 Literature Survey

FDI plays a multidimensional role in the overall development of host economies. It is widely discussed in
the literature that, besides capital flows, FDI generates considerable benefits. These include employment
generation, the acquisition of new technology and knowledge, human capital development, contribution to
international trade integration, creation of a more competitive business environment and enhanced
local/domestic enterprise development, flows of ideas and global best practice standards and increased tax
revenues from corporate profits generated by FDI (Klein et al., 2001; Tambunan, 2005). While FDI is
expected to create positive outcomes, it may also generate negative effects on the host economy. The costs to
the host economy can arise from the market power of large firms and their associated ability to generate very
high profits or by domestic political interference by multinational corporations. But the empirical evidence
shows that the negative effects from FDI are inconclusive, while the evidence of positive effects is
overwhelming, i.e., its net positive effect on economic welfare (Graham, 1995).
FDI in manufacturing is generally believed to have a positive and significant effect on a country’s economic
growth (Alfaro, 2003). However, based on empirical analysis of data from cross-country FDI flows for
1981-1999, Alfaro (2003) points out that the impact of FDI on growth is ambiguous. FDI in the primary
sector tends to have a negative impact on growth, while investment in manufacturing has a positive effect,
and the impact of FDI in services is ambiguous. In general, multinational enterprises have increasingly
contributed to capacity addition and total sales of manufacturing. Further, FDI plays an important role in
raising productivity growth in sectors in which investment has taken place. In fact, sectors with a higher
presence of foreign firms have lower dispersion of productivity among firms, thus indicating that the spill-
over effects had helped local firms to attain higher levels of productivity growth (Haddad and Harrison,
1993). Besides being an important source for diffusion of technology and new ideas, FDI plays more of a
complementary role than of substitution for domestic investment (Borenzstein et al., 1998). FDI tends to
expand the local market, attracting large domestic private investment. This “crowding in” effect creates
additional employment in the economy (Jenkins and Thomas, 2002). Further, FDI has a strong relation with
increased exports from host countries. FDI also tends to improve the productive efficiency of resource
allocation by facilitating the transfer of resources across different sectors of the economy (Chen, 1999).
Little empirical evidence is available on the impact of FDI on the rural economy, in general, and on poverty,
in particular. However, in recent times, there has been increasing interest in studying the linkage between
growth and poverty. FDI inflows are associated with higher economic growth ( Jalilian and Weiss, 2001;
Klein et al., 2001), which is critically important for poverty reduction. But the pattern and nature of the
growth process in an economy also assumes importance. It has been found that FDI had a positive impact on
poverty reduction in areas where the concentration of labour-intensive industries was relatively high (Doanh,
2002).
It has been shown by Bajpai (2004) that India’s
labour-intensive manufacturing can potentially absorb
a major section of the labour force and it holds the
key to achieve dynamic growth in the country.
Further, Aggarwal (2001) showed that high-tech
industries are not attracting efficiency-seeking FDI;
medium- and low-tech industries with foreign stakes
seem to have performed better, indicating that India’s
comparative advantage in exports lies with low-tech
industries. However, Siddharthan and Nollen (2004)
showed that in the information technology sector,
exports by MNE affiliates are greater when they have larger foreign equity stakes.
Though it is expected that growth tends to benefit the poor, this has not happened in many countries. There is
no clear picture whether growth reduces poverty (World Bank, 2000). It is believed that increased flow of
capital raises capital intensity in production, resulting in lower employment generation. However, a higher
level of investment accelerates economic growth, showing wider positive effects across the economy.
Tambunan (2005) found that FDI has positive effects on poverty reduction mainly through three important
ways, viz., labourintensive growth with export growth as the most important engine; technological,
innovation and knowledge spill-over effects from FDI-based firms on the local economy; and poverty
alleviation programmes or projects financed by tax revenues collected from FDI-based firms. However, the
host country’s policies and institutions, the quality of investment, the nature of the regulatory framework and
the flexibility of labour markets are important to attain the expected benefits from FDI (De Melo, 1999;
Klein et al., 2001). The impact of FDI has been found to be the strongest in countries with higher education
levels (Borenzstein et al., 1998; Jalilian and Weiss, 2001). However, FDI may indirectly benefit the poor by
creating better employment and earning opportunities for the unskilled workforce in developing countries
(ODI, 2002).
India-specific studies on FDI have dealt with determinants of FDI, technology spill-overs, export growth and
good governance practices transferred from foreign to domestic firms (Banga, 2003; Kumar, 2002, 2003;
Pant, 1995; Siddharthan and Nollen, 2004). These effects have been estimated through firm-level case
studies and through cross section industry data. However, the impact of FDI on the economy is still not clear
and there is little evidence on the economy-wide impact of FDI in India. However, there is great interest
among academics and policy makers to critically examine the impact of FDI on the different sectors of the
economy and various regions of the country.
In India, FDI equity flows are concentrated in a few states (Morris, 2004). Of the total approved FDI flow,
Maharashtra accounted for the largest proportion with 46 per cent, followed by Gujarat with 15 per cent, and
Delhi with 7.7 per cent. Other states with significant and large investments were Andhra Pradesh, Karnataka
and Tamil Nadu. Among these states, only a few cities were involved in a significant amount of FDI. These
included Ahmedabad, Bangalore, Kolkata, Chennai, Coimbatore, Goa, Hyderabad, Jamnagar,
Kancheepuram, Mumbai, Pune and Raigarh, indicating that the geographical flow of FDI in India is skewed
in favour of relatively large cities. However, for all investments, it is regions with metropolitan cities that
have the advantage in headquartering the country operations of MNEs, thereby attracting the bulk of FDI.
The study suggests that there are vast gains to be made by attracting FDI, especially in services and high-
tech skilled labour-seeking industries.
Aggarwal (2007) has shown that there are wide variations in the FDI inflow across the states of India. Only
seven states2 accounted for over 97 per cent of the total amount of exportoriented FDI and 83 per cent of
total FDI approvals during 1991-2001. The presence of Export Processing Zones was found to be a relevant
pull factor in attracting export-oriented FDI. Further, while explaining the sensitivity of FDI to labour
market conditions, the study revealed that labour market rigidities and labour costs are more pronounced for
exportoriented FDI than for domestic market-seeking FDI. Infrastructure and regional development are
found to be key factors in attracting higher FDI, both in the export and domestic marketseeking sectors.
FDI plant location is a complicated phenomenon. By utilising plant-level data across 100 of the largest cities
in 17 states of India, Goldar (2007) established that the inter-state and intercity distribution of plants of
foreign firms is almost identical to that of domestic firms. This indicates that the factors influencing the
location of plants of foreign companies are, by and large, the same as those for domestic companies. But the
number of plants of foreign companies in a city is positively related to the size of the city, civic amenities in
the city, size of the largest city in the state and investment climate in the state. The presence of a
metropolitan city in the state probably captures the advantage in headquartering the country operations of
multinational companies.
Examining industry-specific spill-over effects, Bergman (2006) has shown that pharmaceutical MNCs in
India made a positive contribution to the growth and development of the industry. Spill-over effects through
imitation, industrial management skills and competition were explicitly observed in the industry. Such
effects were generated not only in product development, but also in marketing and documentation
techniques. The foreign firms’ presence has indirectly encouraged domestic firms to increase their
managerial efforts and to adopt some of the marketing techniques used by MNCs. Further, the presence of
foreign firms has intensified competitive pressure in the industry and stimulated domestic firms to use
accessible resources more efficiently. India’s comparative advantage in pharmaceuticals has boosted the
Indian pharmaceutical enterprises to move and operate abroad.
FDI benefits the host country in a number of ways. However, most of the studies conducted in India and
abroad have been confined to firm/industry-level analyses that focus on determinants and spill-overs from
MNEs to domestic firms. In the Indian context, there is a perception that the flow of FDI, either through
green field investment or mergers and acquisitions, and their associated benefits are concentrated only in
urban/metropolitan areas. It is thus important to know whether and by how much FDI has reached relatively
small cities/ towns since many of these are likely to have neighbouring rural clusters. The present study is a
modest attempt to quantify the linkage of benefits that FDI in India has provided to its rural population.

1.5 FDI in India

There have been significant changes in the growth models of developing economies during the past two
decades. Many of these economies, including India, have moved away from inward-oriented import
substitution policies to outward oriented and market-determined export-oriented strategies. The scepticism
about the role of FDI in reinforcing domestic growth has given way to greater openness to FDI, with a view
to supporting investment and productivity of the host countries. While developing countries have started
accepting FDI inflows with some caution, which is obvious, the developed countries have moved their
investments to foreign locations, subject to safety and profitability of their business operations in foreign
lands.
FDI plays an important role in the transmission of capital and technology across home and host countries.
Benefits from FDI inflows are expected to be positive, although not automatic. A facilitating policy regime
with minimal interventions may be ideal to maximise the benefits of FDI inflows. The debate on its pros and
cons has not yet been settled and is likely to continue. It is not possible to reach a decisive value judgement
on whether FDI is good or bad for the developing country/host economy. It may or may not have the desired
and expected growth-enhancing impact on the host economy. Even more difficult is the question of whether
it brings about equity along with growth effects. FDI might enter a labour-abundant country with capital-
intensive technologies; however, if the labour laws are not flexible, this would have a relatively small impact
on employment generation. On the other hand, the entry of FDI in labour-intensive firms would have a
positive impact on equity and poverty reduction if the FDI-enabled firms choose to locate close to
suburban/rural areas.
The history of capital flows shows that large amounts of FDI criss-crossed the high-income countries and
benefited their economies. The newly industrialised economies (NIEs) constitute important case studies.
Many developing countries, including India, have started receiving significant amounts of FDI in the past
two decades. A large quantum of such FDI originates from high-income countries including the United
States and the EU, while south-south FDI flows have also been increasing.
However, nothing comes for free. Mere openness to FDI inflows may be a necessary but insufficient
condition and the host economy needs to provide a sufficiently enabling environment to attract foreign
investors. In order to fulfil sufficient conditions, the host country has to ensure that it creates absorptive
capability to make the best use of the FDI it receives. It needs to create a level playing field through
developing an efficient, competitive and regulatory regime, such that both domestic and foreign invested
companies play a mutually reinforcing role within a healthy competitive environment.
Among the developing regions, Asia and Africa registered higher FDI inflows than Latin America and the
Caribbean.4 Developing countries are more attractive to transnational corporations5 for various reasons, one
of which is the presence of cheap, skilled and unskilled labour. In other words, there are opportunities that
could help in cost reduction in terms of labour—India’s huge inexpensive labour force, comprised by the
largest working age population in the world, is one of the reasons why foreign investors find India
attractive.6 Moreover, land and other infrastructure are also cheaper; there is promise of emerging large
markets; and there exist ‘created’ assets such as communications infrastructure, marketing networks, and
innovative technology that all help companies become more competitive. Current patterns in global
production are such that developing countries provide the platform for activities in the lower segments in
manufacturing and services, and the developed nations provide expertise in management, technical know-
how and skills upgrade. Large-scale migration of both skilled and unskilled labour has played an important
role in moulding the current global economic order. In the Gulf countries, for example, economic activities
have been driven by migrant skilled labour from the western countries, and unskilled workers from the
poorer Asian nations.
During the early 1980s, following a serious balance of payments crisis and a large loan from the
International Monetary Fund, the Indian government relaxed its foreign investment policy. This engendered
a number of joint ventures in the automotive industry, involving both financial and technical relationships
between Indian and Japanese manufacturers. A few years later, Japanese two-wheeler manufacturers entered
the domestic market, again through joint ventures with major Indian producers. Here again, the ventures
were followed by a series of arrangements between component manufacturers in the two countries. Other
key sectors, like the computer industry, were also provided a more liberal trade and investment environment.
The big opening up came in 1991, following yet another external crisis. This time, the government went
much further than before in introducing a series of both domestic and external reforms that fundamentally
changed the business environment. One of the key components of this new policy was a significant widening
of the range of activities in which foreign firms could enter as well as an easing of the conditions under
which they came in.
This chapter first outlines the reform progress and the evolving pattern of FDI over the past decade. We go
on to report the key results from our FDI survey.

1.6 Investment Outlook

A number of studies in the recent past have highlighted the growing attractiveness of India as an investment
destination. According to Goldman Sachs (2003), the Indian economy is expected to continue growing at the
rate of 5 per cent or more until 2050. According to the A.T. Kearney (2007), India continues to rank as the
second most attractive FDI destination, between China at number one and the United States at number three.
India displaced the United States in 2005 to gain the second position, which it has held since then. FDI
inflows in 2006 touched $19.6 billion and in 2007, total FDI inflows in India stood at $23 billion, showing a
growth rate of 43.2 per cent over 2006. In 2008, total FDI inflows into India stood at $33 billion.

1.7 FDI Performance and Potential Index

UNCTAD ranks countries by their Inward FDI Performance3 and Inward FDI Potential Indices.4 While
India is the second most attractive country in terms of the foreign investors’ confidence index, it does not
rank high on either the performance or potential indices. UNCTAD (2008) provides a matrix of four groups
of countries based on their FDI performance and potential:
a) Front runners: countries with both high FDI potential and performance
b) Above potential: countries with low FDI potential but strong performance
c) Below potential: countries with high FDI potential but low performance
d) Under-performers: countries with both low FDI potential and performance
While countries like Chile, Hong Kong, Malaysia, Singapore and Thailand are “front runners”, and China is
below potential, all the major South Asian countries, viz., Bangladesh, India, Nepal, Pakistan and Sri Lanka
are “underperformers”.
India’s FDI Performance Index in 2007 ranked at 106 (China was 88) out of 141 countries. However, it has
a relatively high FDI Potential Index at 84 (China is 32). India’s outward FDI Performance Index in 2007 is
also high at the 50th position (China was 59th).

1.8 Global Competitiveness of India’s FDI

Another method of assessing the investment potential of an economy is its rank on global competitiveness.5
The Global Competitiveness Index (GCI) is a comprehensive index developed by the World Economic
Forum (WEF) to measure national competitiveness and is published in the Global Competitiveness Report
(GCR). It takes into account the micro- and macro-economic foundations of national competitiveness, in
which competitiveness is defined as the set of institutions, policies and factors that determine the level of
productivity6 of a country and involves static and dynamic components. The overall GCI is the weighted
average of three major components: a) basic requirements (BR)7 ; b) efficiency enhancers (EE)8 ; and c)
innovations and sophistication factors (ISF).
Within the information available for 131 countries, the United States is ranked the highest, with an overall
index of 5.67, and Chad is ranked the lowest with an overall index of 2.78; the overall index is 107 for
Bangladesh, 92 for Pakistan and 70 for Sri Lanka. The overall rank of India at 48 is still below that of China
at 35. In terms of the components, India holds a relatively low rank for BR (74), but higher ranks for EE (31)
and even higher for ISF (26). Compared to China, India’s BR rank is lower, but it is higher than China’s on
EE and ISF.

1.9 REFORMS IN THE INDIAN ECONOMY

Prior to 1991, the government exercised a high degree of control over industrial activity by regulating and
promoting much of the economic activity. The development strategy discouraged inputs from abroad in the
form of investment or imports, while the limited domestic resources were spread out by licensing of
manufacturing activity. The result was a domestic industry that was highly protected – from abroad due to
 import controls and high
duties, and from domestic competition due to licensing and reservations. Industrial policy was dominated by
licensing constraints by virtue of which strict entry barriers were maintained. Under the Industries
Development and Regulation Act (1951), it was mandatory for all companies to get government approval to
set up a new production unit or to expand their activities. Approval was also required if the manufacturer
wanted to change the line of production. Moreover, when permission was granted, it was very specific to
product, capacity and location. The decision to award a license involved many stages and became a highly
bureaucratic process, with some elements of state capture by incumbent domestic firms. This and other
policies led to a very high degree of bureaucratisation of the economy. Also many sectors like textiles were
reserved for the small scale sector, thereby making it difficult for domestic firms belonging to these sectors
to enjoy economies of scale, and making these sectors unattractive to MNCs.
The government also controlled the exit option for a company.
Manufacturers were not allowed to close operations or to reduce their work force without government
approval. The intention was to try to avoid unemployment, but it also promoted inefficiency in the industrial
economy.
Indian trade policy before the 1990s focused on import substitution. Restrictions on imports were imposed in
different forms. In concurrence with the objective of attaining self-reliance, import licensing was imposed to
exercise control over the importers. Further, imports were canalised, which meant that certain commodities
could be imported by only one agency, which was generally a public sector company.Import controls and
high tariff rates led to high input costs, which made Indian producers un-competitive in the world market.
Further, certain items were also subject to export controls with a view to ensure easy availability, low
domestic prices and for environmental reasons. As a result, domestic industry operated in an isolated
environment with limited exposure to the international products and markets.
FDI policy put severe restrictions on foreign investment. Few foreign companies were allowed to retain an
equity share of more than 40 per cent, and as a result many did not use their best technologies in India. The
economy was deprived of foreign capital and foreign technology and internationally efficient scales and
quality of production could not be achieved. Financial sector policy did not focus upon generating enough
capital from within and outside the country. The financial sector was highly regulated by the state. The
government had owned all the major banks since nationalisation in 1969 and the early 1980s. It administered
low interest rates on borrowings and loans to small industries and agriculture; price controls and credit
rationing. Indeed, the basis of planning in India was a Harrod- Domar growth paradigm which made the
government focus on mobilisation of savings for investment. The problem was that there was financial
repression because of price fixing and directed credit. Raising equity from the market was also restricted.
The government decided both the amount of capital as well as price. Apart from interest rates, initial public
offerings and other equity issues required prior government approval through its arm - the Controller of
Capital Issues (CCI). Banks could ignore market forces when taking functional and operational decisions,
and private sector participation was discouraged. Profitability of financial institutions remained low owing to
government control over interest rates and absence of competitive forces. In addition to industrial and trade
policies, public sector policyexclusively reserved certain sectors for the public sector. The public sector was
also present in almost all parts of the economy - petroleum, consumer goods, tourism infrastructure and
services, etc. Infrastructure industries such as power, telecom, air transport, etc., were almost wholly public
sector controlled.
Reservation contributed to lack of competition, which reduced the incentive to be efficient. Over-manning,
poor management, obsolete technology and insufficient research and development activities further
contributed to the decay of public sector undertakings. Most important of all, non-commercial objectives and
government muddling in day-to-day operations made these companies extremely inefficient. Small-scale
industry policy gave protection from domestic as well as international competition. This was done primarily
by reservation of certain product lines exclusively for small industries. The smaller firms benefited from
excise concessions and rebates that were determined on the basis of annual turnover rather than investment
in fixed capital. Financial aid was also given in form of credit from government owned banks on softer
terms. Small firms also benefited from preferential government purchases and input supplies. To summarise
the impact of pre-1990 policies, the Indian industrial structure was weak, both financially and
technologically. However, domestic incumbents had been created who were entrenched and this had
implications for FDI and for the mode of entry in the 1990s. The major prevailing problems were
inefficiencies, high costs, poor management, non-competitiveness, excessive reservation, import controls,
lack of export orientation and disincentives to the foreign investors. Reforms launched in the early 1990s
focused on addressing some of these issues. Since manufacturers were highly dependent on domestic
growth, a more outward looking policy was adopted. Economic policies were liberalised with a view to
encouraging investment and accelerating economic growth.

The new industrial policy announced in 1991 led to de-licensing of industry, competition rather than
protection as the desired policy environment. The earlier requirement of approvals and licenses for any
investments and expansions were abolished for all except 18 industries. Within a few years, only five sectors
remained under the ambit of industrial licensing. Delicensing gave companies freedom to take decisions for
investments, expansions and plant locations. Bureaucratic practices involved in the investment procedures
were reduced significantly. Lowering of entry barriers resulted in greater private sector participation. Trade
reforms addressed the anti-import bias by reducing tariffs, quantitative restrictions and foreign exchange
control. From being one of the most protected domestic economies prior to the reforms, the Indian economy
has become similar to other developing countries. Trade reforms have continued in a sustained manner
throughout the 1990s and it is expected that they will continue in the same manner.The government also
liberalised its policy towards FDI. Many constraints that had historically been imposed on portfolio and
direct investment were removed. The approval process for technical and financial collaborations was
completely revamped. For many industries, the Reserve Bank of India (RBI) would give an automatic
approval. Indian law does not differentiate between an Indian and foreign owned company once it has been
incorporated in India. The same procedures govern Indian and foreign owned companies alike. Like Indian
companies, foreign owned companies also do not now require a license for production in most
manufacturing sectors.
Technology transfers were also made easier by removing many mandatory approval requirements. Another
measure to bring in FDI was reduction of controls on technology and royalty payments. Restrictions on
foreign collaborations investment (both financial and technological) were by and large removed. India’s
financial sector went through a wide variety of reforms during the 1990s (see Sarkar and Agarwal 1997),
aimed at correcting the biases in the lending policies of government owned banks and financial institutions.
Under new polices, the banks were free to decide lending and deposit rates. This was accompanied by a
significantly proposed reduction in pre-emption of bank loans, both by the government and the priority
sector. Both these gave the banks freedom to opt for the most rewarding investments. Capital market reforms
coupled with the removal of restrictions on firms reduced entry barriers for the private sector. As a result,
today there are many private operators in the sector - banks, financial institutions, NBFCs and insurance
companies have a significantly higher private representation. The reforms in the public sector enterprises
(PSEs) were intended to be three pronged; privatisation, greater autonomy and reduction of the monopoly
power of the public sector. However, much has not been accomplished. First, privatisation has not been very
successful. Minor proportions of a few companies' total equity was "dis-invested', only one company out of a
total of 242 public sector companies owned by the government has been completely privatised. Second,
though some attempts were made at giving greater autonomy to PSEs this has largely been unsuccessful
(Bhandari and Goswami 2002).
Third, the public sector environment was highly un-competitive vis-à-visthe rest of the world. Abolishing its
monopoly was thought to be a solution that would force public companies to adopt better management
practices. Sectors reserved exclusively for public sector were dereserved (except for some social and security
sectors). This was a policy measure to bring in private performers in competition with the PSEs. Compared
to the first two, these measures have been much more successful. The policy reforms with respect to small-
scale sector have not been as significant. Small industries traditionally benefit from the preferential treatment
given by the government in many ways, including reservations and tax concessions. Protective polices
continue to shield small manufacturers from competition from the medium and large ones. As a
consequence, much of the small sector depends on subsidies, concessions and reservations for its survival.
India removed most quantitative restrictions from April 1st, 2001. Under such circumstances, the small
manufacturers face serious challenges from international producers who have open access to the domestic
market.

1.10 Objectives of the Current Study

While empirical and econometric work on testing various theoretical hypotheses is embedded in the extant
literature on FDI, there has been no comprehensive attempt to examine the spatial and sectoral spread of
FDI-enabled production facilities in India and their linkages with rural and suburban areas. The majority of
the population, both urban and rural, is expected to gain, indirectly and differentially, from FDI. While FDI
may benefit the economy at both macroeconomic and microeconomic levels through bringing in non-debt-
creating foreign capital resources, technological upgrading, spill-over and allocative efficiency effects, it is
equally important to probe whether people in the rural and suburban areas get affected through such benefits.
FDI in relatively labour-intensive sectors including food processing, textiles and readymade garments,
leather and leather products, and light machine tools, with plants set up in small cities close to rural and
suburban areas, would tend to have relatively high employment-generating potential. The present study
makes a modest contribution by providing a comprehensive analysis of the various aspects of the impact of
FDI on the Indian economy. The objectives of the study are as follows:
1. Spatial Spread
To take stock of the spatial spread of FDI-enabled production facilities in India during the past five
years (2001 to 2006). The production facilities to be studied include manufacturing plants as well as
service-providing facilities as these evolved either as green field or as M&A processes, located in
cities other than metros and Tier 1 cities and in rural areas, in particular.
2. Sectoral Clustering
To bring out sectoral clustering across the states and sub-state regions (cities, towns and rural areas
of districts) in order to assess the types of production facilities that have entered relatively small
towns and rural areas outside municipal limits (2006 to 2008).
3. Depth of Value-Added
To enable a comprehensive understanding of the value-added features of the FDI linked production
facilities and their role in providing employment opportunities.
4. Employment-Generating Effects
To analyse the impact of FDI on various rural activities, especially in the agriculture and food-
processing sectors, and to assess the positive and negative impact of employment through FDI-
enabled production activities.
5. Labour and Capital Intensity
To identify FDI-enabled sectors by their levels of skill, scale, capital and labour requirements, to
compare these features with domestically invested production facilities that produce similar products
and services, and to provide comprehensive documentation of FDI-enabled production facilities by
their labour and capital requirements.
6. Comparative Performance
To compare the efficiency and profit levels of MNC affiliates established in India with firms under
their parent companies operating outside India. To make similar comparative analyses in a particular
sector between FDI-enabled production facilities and domestically invested production facilities.
7. FOREX Implications
To understand the implications of repatriation of profits earned in India versus profits retained and
invested.
8. Backward and Forward Linkages
To estimate the backward and forward linkages of FDI-enabled sectors by mapping these on the
latest available input output tables for India.
9. FDI in Service Sectors
To study the impact of FDI in service sectors on the rural economy
10. Special Economic Zones (SEZs)
To study the concentration of production facilities in SEZs, analyse the relative performance of such
plants inside and outside SEZs, and examine the impact of such production on the Index of Industrial
Production.
11. Export Potential
To assess the share of export-seeking FDI in various sectors of production in order to gauge the
untapped potential of exports of labour-intensive goods from India. 12. Greenfield FDI versus FDI
through Mergers and Acquisitions
To document the sectoral distribution of FDI through these two routes, and to compare the rural and
suburban linkages through these two routes.
1.11 HISTORY
In the years after the Second World War global FDI was dominated by the United States, As much of the
world recovered from the destruction brought by the conflict. The US accounted for around three-quarters of
new FDI (including reinvested profits) between 1945 and 1960. Since that time FDI has spread to become a
truly global phenomenon, no longer the exclusive preserve of OECD countries.
FDI has grown in importance in the global economy with FDI stocks now constituting over 20 percent of
global GDP. Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as
factories, mines and land. Increasing foreign investment can be used as one measure of growing economic
globalization. Figure below shows net inflows of foreign direct investment as a percentage of gross domestic
product (GDP). The largest flows of foreign investment occur between the industrialized countries (North
America, Western Europe and Japan). But flows to non-industrialized countries are increasing sharply.

1.12 World investment report

Data shows that Asia is one of the largest recipients of foreign investment in the world.9 Among the top FDI
destinations in the region are China, Hong Kong, Singapore, Indonesia and India. Although Southeast Asia
is the driver of FDI growth in the region, inflows to South Asia—in particular, India—are also significant.
South Asia recorded a four-percent increase in FDI in 2018 to US$ 54 billion from US$ 52 billion in 2017,
and by a further 10
percent in 2019 to US$ 60 billion.10 FDI in India has been on a long-term growth trend. Along with
countries like Vietnam, India is emerging as alternate investment destinations for China. Despite the setback
caused by the COVID-19 pandemic, India’s large market will continue to attract market-seeking
investments. Increasing inflows of foreign investments will boost the domestic economy. Whether the gains
from such investments will be distributed evenly across the country is worth examining. Wide variations in
FDI inflows across the states will result in an unbalanced growth and can worsen inequality. Policymakers
need to focus on ensuring balanced regional growth across the country, and improving the inflow of FDI to
the regions. Lack of state-wise data on FDI in India is a major impediment to objective policymaking.
 Chapter 2: RESEARCH METHODOLGY

2.1 Meaning:
Research methodology is a way of explaining how a researcher intends to carry out their research. It's a
logical, systematic plan to resolve a research problem. A methodology details a researcher's approach to the
research to ensure reliable, valid results that address their aims and objectives. It encompasses what data
they're going to collect and where from, as well as how it's being collected and analysed.

2.2 Sample Design

Sampling design defines as the researcher has to make a careful selection of a few elements from the
population and then study them intensely and reach conclusion, which can be safely applied to the
population. The selection of sample is very important task. The researcher should determine the size of
sample, the method of sampling, the test of sample.

• Population
The study is based on Foreign Direct Investment amongst older people In every house of in Mumbai region.

• Sample size
Sample size is the measure of the number of individual samples used in an experiment. The survey was
conducted with 45 respondents. Sampling unit
A sampling unit is one of the units selected for the purpose of sampling. Here, sampling unit is the older
people in house of Mumbai region.

2.3 Scope of FDI in India in past and future

FDI is the investment of funds that is handled by an organization from one country to another. The intent
behind it is to establish “lasting interest”. According to OECD
(Organization for Economic Co-Operation and Development). Lasting interest is determined when the
organization acquires a minimum of 10% voting power in the other organization.
Here are some of the benefits that come with FDI investments:

Increased Economic growth and higher rate of employment – The creation of jobs is amongst the most
obvious advantage that comes with FDI. It is amongst the most important reason that helps with the growth
of nation. Increased FDI boosts the overall service as well as manufacturing sector. This brings in jobs for
both skilled as well as unskilled labour.

Human Resource Development – The less obvious advantage that comes with FDI is the competence of
workforce and the human capital knowledge. Skills that are gained are then enhanced with the help of
experience and training.

Backward Areas are being developed – Most crucial benefit that comes with FDI for developing country.
This provides an instant boost to the social economic status in the area.
Finance and Technology provisions – Businesses tend to get an access of the latest financing tools,
operational practices, as well as technologies from across the world. This results in an enhanced efficiency
and effectiveness of the industry.

Increased Exports – FDI helps enhance domestic consumption. These products are mostly available in the
global markets. 100% Export Oriented Units and Economic Zones have further boosted exports.

Exchange Rate Stability – The constant FDI flow into the country brings in continuous foreign exchange
which increases the revenue. This also helps the Central Bank maintain a very comfortable reserve of foreign
exchange.

Economic Development – FDI adds to the external capital of the country which in turn adds to the revenue
of the country. When factories are constructed, materials, local labor, and equipment are utilized. The
factories create additional tax revenue for the Government which can then be infused into creating and
improving the physical and financial infrastructure.

FDI India is one of the top FDI experts in India. They help the organizations to accomplish unfamiliar
interests in a hassle-free way and facilitate their approach to get unfamiliar speculations that they have been
searching for. The team of experts in FDI India leaves no stone improved in making the FDI cycle for its
customers simple as they give minimal effort high caliber and cycle driven Foreign Direct Investments.

The foreign direct investment into India is a process for facilitating people to invest in India.
If you are really interested in doing business in India with the help of foreign capital then make sure that you
are investing in the right source and you can do this in a number of ways. Even when India was going
through tough times, it was still a good financial breeding ground for all foreign investors. They have never
felt the pressure as their genre of investment has always been unleashed for the purpose of ushering more
capital within the country.

There have been several Indian infrastructures who may have suffered in the field of production and
manufacturing due to lack of essential capital. However, a good way for them to survive is by offering FDI
equity to companies or individuals who would be interested in making huge capital investments.

Foreign direct investment in India is done in several ways. Investment can take place through effective
financial collaborations. In this case the common interest is the yearly financial turn over and to make this
work out two or more companies come in association and they share much in contributing towards a
common financial consensus. The effort has to be there from both the ends, from the part of the investor and
also from the part of the collaborator. When collaborating, you can keep the leadership factors aside and
think about a healthy togetherness contributing towards a bigger financial platform.
As a way towards FDI equity is also a joint venture and a technical collaboration. Once the company
delivers the plan of taking things technically ahead then other can contribute in a different way. It is more
technical and less of financial collaboration.

Foreign direct investment in India is not permissible in all industrial sectors as it is not allowed in the
domain of arms and ammunitions. You cannot invest in the field of atomic energy. You cannot invest
anything related to railway and transport and you cannot even put your money in the field of coal and lignite.
It is even not permissible to invest money in matters of metal mining. Thus, keeping aside these domains you
still have a huge scope for investment.

2.4 NEED OF FDI IN INDIA:

Foreign Direct Investment (FDI) is the investment of funds by a company from one country to another.
There are many ways in which FDI benefits the recipient nation:

• Employment and Economic Growth – Development of work is the most apparent benefit of FDI. It
is also one of the key reasons why a country, in particular a developing country, is trying to attract
FDIs. Increased FDI enhances both the development industry and the services sector. In exchange,
this increases opportunities and tends to lower the unemployment of trained young people in the
world – and professional and unqualified workers.

• Human Resource Development – This is one of FDI’s less evident benefits. It’s always understated,
but very important. The expertise and skill of workers is alluded to by human resources. Training and
knowledge gained as well as improved skills, helps improve education and the country’s share of
human resources.

• Finance & Technology – Recipient organizations have access from around the world to state-of-the-
art financial instruments, innovations and operational activities. In the longer term, the adoption of
 modern, advanced technology and methods would extend to the local economy, resulting in
improved industry productivity and efficiency.

• Exports Increase – Not all products made by FDI are intended for domestic use. Many have world
markets for these goods. FDI investors have further helped to improve their exports from other
countries by developing 100% export-driven units and economic zones.

• Capital Flow – Capital inflows are especially useful for countries with limited domestic resources
and countries with limited chances of raising money on global capital markets.

• Competitive Market – FDI helps to build a dynamic atmosphere and crack domestic monopolies by
encouraging the entrance of international organizations into the domestic market. A stable business
climate encourages businesses to consistently develop their products and processes and thereby
encourage creativity. Consumers now have access to a larger selection of goods at affordable prices.

• Technology: A developing country also gets access to the latest technology as investors bring it to
the country. Over time, this advanced and modern technology extends to the local economy, resulting
in improved efficiency and productivity.

• Development of backward areas: This is one of the most crucial benefits of FDI for developing
countries. FDI enables the transformation of backward areas in country into industrial centres. This
in turn provides a boost to the social economy of the area. The Hyundai unit at Sriperumbudur,
Tamil-Nādu in India exemplifies this process.

• Exchange rate stability: The constant low of FDI into a country translates into a continues flow of
foreign exchange. This helps the country’s central bank maintain a comfortable reserve of foreign
exchange. This in turn ensures stables exchange rates.

2.5 OBJECTIVIES OF FDI

• Economic Growth: FDI is seen as a significant driver of economic growth as it brings in much-
needed capital investment and technical expertise to the country, which can help boost productivity,
increase employment opportunities, and improve the overall standard of living.

• Employment Generation: FDI can help create employment opportunities by establishing new
businesses or expanding existing ones, which can help reduce poverty and improve the economic
well-being of the people.

• Technology Transfer: FDI can facilitate the transfer of advanced technology, skills, and managerial
expertise to the host country, which can help improve the competitiveness of local industries,
increase productivity and create a knowledgebased economy.

• Export Promotion: FDI can help promote exports from the host country by integrating local
businesses with global supply chains, which can lead to increased foreign exchange earnings and a
reduction in trade deficits.
 • Infrastructure Development: FDI can play a crucial role in the development of infrastructure in the
host country, particularly in sectors such as power, transportation, and telecommunications, which
can help improve the quality of life of the people and facilitate economic growth.

• Strategic Importance: FDI can also have strategic importance for a country, particularly in sectors
such as defines and energy, where it can help enhance national security and reduce dependence on
foreign suppliers.

2.6 Types of investment

There are two types of foreign investment
• foreign direct investment,
• non-direct investment (portfolio investment)
Foreign direct investment (FDI) takes place when a company, multinational corporation or individual from
one country invests in another country’s assets or takes an ownership stake in its companies. It generally
takes the form of acquiring a stake in an existing enterprise in the foreign country or starting a subsidiary to
expand the operation of an existing enterprise of that country.
FDI can take two different forms: Greenfield or mergers and acquisitions (M&As).
• Greenfield investment involves the creation of a new company or establishment of facilities abroad.
A greenfield investment is a form of market entry commonly used when a company wants to achieve
the highest degree of control over foreign activities.
• Mergers and acquisitions amounts to transferring the ownership of existing assets to an owner
abroad. In a merger, two companies are merged to form one, while in an acquisition one company is
taken over by another.
Non-direct investment - also referred to as ‘foreign portfolio investment’ - takes place when companies,
financial institutions or individuals buy stakes in companies on a foreign stock exchange. This type of
investment is not made with the intention of acquiring a controlling interest in the issuing company.
Typically, this type of investment is short-term in nature and is made to take advantage of favourable
changes in exchange rates or to earn short-term profits on interest rate differences. It provides the investors
with an opportunity to diversify their portfolios and better manage the associated risk.
Foreign portfolio investment can also help to strengthen the domestic capital markets by enhancing liquidity
and contribute to improving their functioning. This in turn will lead to optimal allocation of capital and
resources in the domestic economy. For an emerging economy, foreign portfolio investment can prove to be
a significant contributor to its development, creating significant wealth.

What Are the Different Types of FDI?

The investment market is vast, with several avenues for investment opportunities. Even within FDI, there are
four distinct types of investments, each with its own approach. Here are the different types of foreign direct
investments:
1. Horizontal FDI
Horizontal FDI is the most common type of foreign investment. It involves investing capital in a foreign
company that belongs to the same industry sector that the investor conducts or owns business operations in.
Thus, the investment is made through the domestic company in a foreign company, both of which produce
similar goods and belong to the same industry. The distribution of funds is seen horizontally across the
sectors, despite being in different countries since the core business undertaking is the same. It can also be
seen as an expansion of the investor’s domestic business overseas.
2. Vertical FDI
A vertical FDI is when an entity invests within the supply chain of a business, but the component may not
necessarily belong to the same industry. Thus the investor chooses to invest in a foreign company that can
supply that component. For instance, a coffee producer may invest capital in overseas coffee plantations.
Here, since the investing company is purchasing a provider in the supply chain, this is known as backward
vertical integration. On the other hand, when the investor invests in a foreign company that is placed higher
in the supply chain it is known as forwarding vertical integration. For example, the same coffee company
may want to invest in a foreign grocery chain. Thus, the business expansion occurs on a different level in the
business supply chain, but the undertakings are still associated with the primary business. This helps the
investor is effectively strengthening their supply chain without drastically modifying their business.
3. Conglomerate FDI
When an investor chooses to invest in two entirely different businesses based in completely different
industries, it is known as conglomerate FDI. In this scenario, the FDI is not directly linked to the foreign
investor’s business. For instance, an automobile manufacturer may decide to invest in Pharma. Here, the
investor is undertaking foreign business investments that are completely unrelated to their domestic business.
This type is relatively uncommon since the difficulty of establishing a business in a new country is
compounded by the difficulty of a breakthrough in a new market or industry. The goal of a conglomerate
FDI is to expand into new niches and explore different business opportunities.
4. Platform FDI
Platform FDI is the final type of foreign direct investment. In this case, the investor’s business works
towards expansion in a foreign country, with the ultimate aim of exporting the manufactured products to a
completely different, third country. For example, a clothing brand based in North America may outsource
their manufacturing process to a developing country in Asia, and sell the finished goods in Europe. Thus the
expansion occurs in one foreign country, and the output is carried on to a different foreign country. This type
of FDI is generally seen in free-trade regions in countries that are actively seeking FDI. Luxury clothing
brands are a classic example of this type of FDI and manufacturing process.
2.7 Data collection
Data for the study was collected from primary as well as secondary sources.

• Primary Sources of Data Collection

For this research primary source of data collection was done by survey method. The survey was Conducted
through Structured Questionnaire which was asked to the respondents. The Questionnaire was prepared
keeping in mind the objectives of the study and also the hypothesis Of the study. The questions asked to the
respondents were close ended so that the respondents Could answer quickly without any problem. The
questionnaire was prepared with the help of Google forms. The questionnaire was divided in to 2 main parts
i.e. the age, gender and other details of the Respondents and the questions relating to the topic. Secondary
sources of Data Collections
Secondary sources of data means the data that is already available on various platforms. Secondary data can
be obtained by various publications by the central or the state government or By any organizations, journals,
books,, magazines, and even newspapers, reports published by Various organizations, schools, universities
etc. This type of data collection is used to gain more knowledge of the topic of our research by Collecting
articled by authors who have previously researched on the topic that we have selected. In this study
secondary data was collected through various websites, online journals, which Helped in completing the
review of literature. Secondary source of data collection was useful to Understand the research topic more
accurately.
Method of Data collection

• Accurate and systematic data collection is critical to conducting scientific research.

• Data collection allows us to collect information that we want to collect about our study participants.

• Depending on research type, methods for data collection include documents review, observation,
questioning, measuring, or a combination of different methods.

• Here, I have selected questionnaire method to collect data.

• Questionnaire is a research instrument consisting of a series of questions and other prompts for the
purpose of gathering information from respondents. Steps require to design and administer a
questionnaire
1. DEFINING THE OBJECTIVES OF STUDY
A Questionnaire should allow us to collect the most complete And accurate data in a logical flow. This is
done in order to reach reliable conclusions from What we are planning to observe. A well-designed
questionnaire should meet the research goal and objectives and minimize unanswered questions—a common
Problem bound to many surveys.
2. DEFINE THE TARGET RESPONDENTS AND METHOD TO REACH THEM.
The researcher should clearly define the target, study populations from which she/ he collects data and
information. Main methods of reaching the respondents are: personal contact, interview, mail/Internet-based
questionnaires, telephone interview.

3. WRITING THE QUESTIONNAIRE

Before writing the questionnaire
researcher should decide on the
Questionnaire content. Each question
should contribute to testing one or more
Hypothesis/ research question established
in the research design. Questions could be:

• Open format questions that are

without a predetermined set of Responses.
• Closed format questions that take
the form of a multiple-choice Question.
Following points to be considered while writing a Questionnaire:

• Clarity: question has the same meaning for all the respondents
• Phrasing: short and simple sentences, only one piece of Information at a time, avoid negatives if
possible, ask precise Questions, in line with respondent level of knowledge.

• Sensitive question: avoid questions that could be Embarrassing to respondents. Hypothetical

questions should be avoided if possible

4. QUESTIONNAIRE PILOT TESTING

• The major challenge in questionnaire design is to make it clear to all respondents.

• In order to identify and solve the confusing points, we need to pre-test the questionnaire.

• During the pilot trial the questionnaire participants should be randomly selected from the study
population.
5. QUESTIONNAIRE ADMINISTRATION
6. RESULT INTERPRETATION

2.8 Advantages of FDI

The advantages of foreign direct investment can be enumerated as follows:
• Best practices: It brings technology to developing nations. Besides, it brings the most efficient
management ideas to the business that is the recipient. Also, the recipient organization's employees
learn innovative ways of accomplishing goals prevalent internationally. Consequently, the lifestyle of
the workers in recipient organizations enhances.
• High Standard of Living: Due to FDI, the living standard of the entire developing nation increases.
This is possible as the recipient organization receives a significant amount of money due to foreign
financing. Consequently, it pays a higher amount of taxes. This in turn benefits the people of the
developing nation.
• Establishing stable long-term lending: A major benefit of FDI is that it removes the volatile effect
of hot money. Hot money refers to a capital whose transferring takes place frequently with the aim of
maximizing capital gain. Due to this, the entire nation can be ruined. With foreign direct investment,
this problem is effectively tackled.
• FDI stimulates economic development: It is the primary source of external capital as well as
increased revenues for a country. It often results in the opening of factories in the country of
investment, in which some local equipment – be it materials or labour force, is utilised. This process
is repeated based on the skill levels of the employees.

• Increased employment opportunities: As FDI increases in a nation, especially a developing one, its
service and manufacturing sectors receive a boost, which in turn results in the creation of jobs.
Employment, in turn, results in the creation of income sources for many. People then spend their
income, thereby enhancing a nation’s purchasing power.

• Development of human resources: FDI aids with the development of human resources, especially if
there is transfer of training, technology and best practices. The employees, also known as the human
capital, are provided adequate training and skills, which help boost their knowledge on a broad scale.
But if you consider the overall impact on the economy, human resource development increases a
country’s human capital quotient. As more and more resources acquire skills, they can train others
and create a ripple effect on the economy.

• FDI enhances a country’s finance and technology sectors: The process of FDI is robust. It
provides the country in which the investment is occurring with several tools, which they can leverage
to their advantage. For instance, when FDI occurs, the recipient businesses are provided with access
to the latest tools in finance, technology and operational practices. As time goes by, this introduction
of enhanced technologies and processes get assimilated in the local economy, which make the fin-
tech industry more efficient and effective.
Apart from the above points, there are a few more we cannot ignore. For instance, FDI helps develop a
country’s backward areas and helps it transform into an industrial centre. Goods produced through FDI may
be marketed domestically and also exported abroad, creating another essential revenue stream. FDI also
improves a country’s exchange rate stability, capital inflow and creates a competitive market. Finally it helps
smoothen international relations.

2.9 Disadvantages of FDI

Though there are a lot of benefits in a Foreign Direct Investments (FDI), there are still a lot of disadvantages
which need attention.
• Disappearance of cottage and small scale industries:
Some of the products produced in cottage and village industries and also under small scale industries
had to disappear from the market due to the onslaught of the products coming from FDIs. Example:
Multinational soft drinks.

• Contribution to the pollution:

Foreign direct investments contribute to pollution problem in the country. The developed countries
have shifted some of their pollution-borne industries to the developing countries. The major victim is
automobile industries. Most of these are shifted to developing countries and thus they have escaped
pollution.

• Exchange crisis:
Foreign Direct Investments are one of the reason for exchange crisis at times. During the year 2000,
the Southeast Asian countries experienced currency crisis because of the presence of FDls. With
inflation contributed by them, exports have dwindled resulting in heavy fall in the value of domestic
currency. As a result of this, the FDIs started withdrawing their capital leading to an exchange crisis.
Thus, too much dependence on FDls will create exchange crisis.

• Cultural erosion:
In all the countries where the FDls have made an inroad, there has been a cultural shock experienced
by the local people, adopting a different culture alien to the country. The domestic culture either
disappears or suffers a setback. This is felt in the family structure, social setup and erosion in the
value system of the people. Importance given to human relations, hither to suffers a setback with the
hi-fi style of living.

• Political corruption:
In order to capture the foreign market, the FDIs have gone to the extent of even corrupting the high
officials or the political bosses in various countries. Lockheed scandal of Japan is an example. In
certain countries, the FDIs influence the political setup for achieving their personal gains. Most of the
Latin American countries have experienced such a problem. Example: Drug trafficking, laundering
of money, etc.

• Inflation in the Economy:

The presence of FDIs has also contributed to the inflation in the country. They spend lot of money on
advertisement and on consumer promotion. This is done at the cost of the consumers and the price is
increased. They also form cartels to control the market and exploit the consumer. The biggest world
cartel, OPEC is an example of FDI exploiting the consumers.

• Trade Deficit:
The introduction of TRIPs (Trade Related Intellectual Property Rights) and TRIMs (Trade Related
Investment Measures) has restricted the production of certain products in other countries. For
 example, India cannot manufacture certain medicines without paying royalties to the country which
has originally invented the medicine. The same thing applies to seeds which are used in agriculture.
Thus, the developing countries are made to either import the products or produce them through FDIs
at a higher cost. WTO (World Trade Organization) is in favour of FDIs.

• World Bank and lMF Aid:

Some of the developing countries have criticized the World

Bank and IMF (International Monetary Fund) in extending assistance. There is a discrimination
shown by these international agencies. Only those countries which accommodate FDIs will receive
more assistance from these international institutions.

• Convertibility of Currency:
FDIs are insisting on total convertibility of currencies in under-developed countries as a prerequisite
for investment. This may not be possible in many countries as there may not be sufficient foreign
currency reserve to accommodate convertibility. In the absence of such a facility, it is dangerous to
allow the FDIs as they may withdraw their investments the moment they find their investments
unprofitable.

2.10 limitations of Foreign Direct Investment (FDI) in India :

There are several limitations of Foreign Direct Investment (FDI) in India:
• Regulatory barriers: Despite liberalization measures, India still has complex regulations and
bureaucratic procedures that can make it difficult for foreign companies to invest and operate in the
country.

• Infrastructure challenges: India's infrastructure, including transportation, power, and

telecommunications, is still underdeveloped in many areas. This can make it challenging for foreign
companies to do business and can increase the cost of doing business.
 • Skilled workforce shortage: India has a shortage of skilled workers in many areas, including
technology, engineering, and management. This can make it difficult for foreign companies to find
the talent they need to operate in the country.

• Political instability: India's political situation can be unpredictable, and there have been instances of
policy changes and reversals that can make it difficult for foreign companies to plan for the long
term.

• Cultural differences: India's culture and business practices can be different from those of other
countries, and foreign companies may find it challenging to navigate these differences.
• Corruption: Corruption is a significant issue in India, and foreign companies may face challenges in
dealing with corrupt officials and practices.

• Legal system: India's legal system can be slow and inefficient, and foreign companies may face
challenges in resolving disputes.
Overall, while India has made progress in attracting foreign investment, there are still significant challenges
that need to be addressed to make it a more attractive.
2.11 The Benefits of Foreign Direct Investment in India

Foreign Direct Investment (FDI) plays a crucial role in the economic development of any country, including
India. FDI involves investment by foreign entities in domestic businesses and assets, leading to numerous
benefits for both the host country and the investing entities. In the case of India, FDI has been instrumental
in driving economic growth, enhancing productivity, creating employment opportunities, fostering
technology transfer, and improving infrastructure. This paper delves into the multifaceted benefits of FDI in
India, highlighting its positive impact on various sectors and the overall economy.
FDI inflows contribute significantly to India's economic growth by injecting capital into various sectors of
the economy. These investments stimulate demand, increase production capacities, and drive overall
economic activity. FDI also promotes competition and efficiency by introducing advanced technologies,
management practices, and expertise, which further fuel economic growth.
One of the most tangible benefits of FDI is its contribution to job creation. Foreign investors often establish
new ventures or expand existing ones, leading to the creation of employment opportunities across different
skill levels. This is particularly crucial for India, given its large and growing workforce. FDI not only
generates jobs directly within the invested companies but also stimulates employment indirectly through
supply chain linkages and multiplier effects.
Foreign investors bring advanced technologies, research capabilities, and innovative practices that can
significantly benefit domestic industries. Through joint ventures, collaborations, and technology licensing
agreements, FDI facilitates the transfer of knowledge and expertise, thereby enhancing the technological
capabilities of Indian firms. This transfer of technology fosters innovation, improves product quality, and
increases competitiveness in both domestic and international markets.
FDI inflows often target sectors such as infrastructure, telecommunications, and manufacturing, where
significant capital investment is required. This investment not only improves the quality and efficiency of
infrastructure but also bridges gaps in critical sectors such as transportation, energy, and
telecommunications. Enhanced infrastructure boosts productivity, reduces transaction costs, and facilitates
trade and investment, thereby fostering overall economic development.
Foreign investors in India often leverage the country's skilled workforce, cost-effective production
capabilities, and strategic geographical location to manufacture goods for export. FDI-led export-oriented
industries contribute to foreign exchange earnings, trade balance improvement, and integration into global
value chains. Additionally, foreign companies operating in India often serve as conduits for exporting Indian
goods and services to international markets, thereby expanding market access and diversifying export
destinations.
FDI inflows contribute to the stability of India's balance of payments by providing a stable and long-term
source of foreign capital. Unlike volatile portfolio investments, FDI represents a more sustainable form of
foreign investment, as it reflects a long-term commitment by foreign investors. These inflows help finance
current account deficits, strengthen the rupee, and build foreign exchange reserves, thereby enhancing the
stability of India's external sector.
The presence of foreign investors in India fosters competition, efficiency, and transparency in the business
environment. To attract and retain foreign investment, governments often undertake reforms to streamline
regulations, improve infrastructure, and enhance the ease of doing business. These reforms not only benefit
foreign investors but also create a more conducive environment for domestic businesses, leading to overall
economic development.
Foreign Direct Investment plays a pivotal role in driving economic growth, promoting technology transfer,
creating employment opportunities, and enhancing infrastructure in India. By leveraging foreign capital,
expertise, and technology, FDI contributes to the country's development goals and strengthens its position in
the global economy. However, it is essential for policymakers to formulate conducive policies, ensure
regulatory clarity, and address infrastructure bottlenecks to attract sustained FDI inflows and maximize its
benefits for India's long-term prosperity.

2.12 Assessing the Role of Foreign Direct Investment (FDI) in India's Economic Development

Foreign Direct Investment (FDI) has emerged as a critical component of India's economic growth strategy,
with significant implications for various sectors and overall development. This essay aims to analyze the
multifaceted impact of FDI on India's economy and assess whether it is the best path for the country's
development. By examining key advantages, challenges, and policy considerations, we can gain insights into
the suitability of FDI as a driver of India's economic progress.
Capital Inflow and Investment: FDI brings in much-needed capital to fuel investment across sectors such as
manufacturing, infrastructure, and services. This influx of capital supports economic expansion, stimulates
demand, and enhances production capacities, laying the foundation for sustained growth.
Technology Transfer and Innovation: Foreign investors often possess advanced technologies, managerial
expertise, and innovative practices that can benefit domestic industries. Through collaborations, joint
ventures, and technology licensing agreements, FDI facilitates the transfer of knowledge and skills, fostering
technological advancements and promoting innovation.
Employment Generation: FDI contributes to job creation by establishing new ventures, expanding existing
businesses, and generating demand for skilled and unskilled labor. The employment opportunities created by
foreign investment not only reduce unemployment but also improve living standards and contribute to social
stability.
Export Promotion: Foreign companies operating in India often leverage the country's cost-effective
production capabilities and skilled workforce to manufacture goods for export. FDI-led export-oriented
industries contribute to foreign exchange earnings, trade balance improvement, and integration into global
value chains, thereby boosting economic growth and development.
Infrastructure Development: FDI inflows target sectors such as infrastructure, telecommunications, and
manufacturing, where significant capital investment is required. This investment improves the quality and
efficiency of infrastructure, bridges critical gaps, and enhances productivity, facilitating overall economic
development.
2.13 Challenges and Considerations
Dependency and Vulnerability: Overreliance on FDI can make India vulnerable to external economic shocks
and fluctuations in global capital flows. It is essential to strike a balance between attracting foreign
investment and building domestic capabilities to reduce dependency on external sources of funding.
Regulatory Framework and Policy Stability: Uncertainty in regulatory frameworks, policy inconsistency,
and bureaucratic hurdles can deter foreign investors and undermine the effectiveness of FDI as a driver of
economic development. Creating a conducive business environment with clear, stable, and transparent
regulations is crucial to attracting and retaining foreign investment.
Technology Absorption and Adaptation: While FDI facilitates technology transfer, it is essential to ensure
that domestic firms can effectively absorb and adapt these technologies to enhance their competitiveness.
Investing in education, skill development, and research and development infrastructure is necessary to
maximize the benefits of technological spillovers from FDI.
Socioeconomic Impacts: FDI can exacerbate income inequality, exploit natural resources, and lead to social
and environmental challenges if not managed properly. Policymakers need to implement measures to
mitigate adverse socioeconomic impacts, promote inclusive growth, and ensure sustainable development
outcomes from foreign investment.
Balance of Payments and Exchange Rate Stability: While FDI contributes to capital inflows and strengthens
the balance of payments, it is essential to manage capital flows to prevent currency appreciation and
maintain export competitiveness. Implementing prudential measures such as capital controls and exchange
rate management can help mitigate risks associated with excessive capital inflows.
Opinions about FDI are diverse and often depend on the specific context, interests, and objectives of
different stakeholders. Here are some common viewpoints:
Proponents of FDI: Many economists, policymakers, and business leaders view FDI as a crucial driver of
economic growth, job creation, and technological advancement. They argue that FDI brings in much-needed
capital, expertise, and technology, which can complement domestic resources and contribute to overall
development. Proponents also emphasize the role of FDI in enhancing global competitiveness, integrating
into global value chains, and attracting complementary skills and resources.
Critics of FDI: Some critics raise concerns about the potential negative impacts of FDI, such as dependency
on foreign capital, exploitation of natural resources, and adverse effects on local industries and employment.
They argue that FDI can exacerbate income inequality, environmental degradation, and social tensions if not
managed properly. Critics also highlight the risks of loss of sovereignty, as foreign investors may exert
undue influence on policy decisions and economic priorities.
Conditional Supporters: Many stakeholders acknowledge the potential benefits of FDI but advocate for
careful regulation, monitoring, and strategic planning to maximize its positive impacts while mitigating
risks. They stress the importance of establishing transparent regulatory frameworks, promoting responsible
investment practices, and ensuring that FDI aligns with national development goals and priorities.
Conditional supporters also emphasize the need for technology transfer, skill development, and capacity
building to enable domestic firms to derive maximum benefits from FDI.
Nationalists and Protectionists: In some cases, nationalist or protectionist sentiments may lead to
skepticism or outright opposition to FDI. These stakeholders prioritize national interests, economic
sovereignty, and protection of domestic industries over the potential benefits of foreign investment. They
may advocate for restrictive policies, such as limits on foreign ownership, stringent regulations, or outright
bans on certain types of FDI, to safeguard national interests and preserve cultural identity.
Pragmatists: Pragmatic viewpoints recognize that FDI can be both beneficial and challenging, depending on
the specific circumstances and how it is managed. Pragmatists advocate for evidence-based decision-
making, continuous monitoring, and adaptive policies that strike a balance between attracting foreign
investment and safeguarding national interests. They emphasize the importance of flexibility, resilience, and
responsiveness to changing economic conditions and global dynamics.
In summary, opinions about FDI vary widely, reflecting diverse perspectives, interests, and values. While
proponents highlight its potential benefits for economic development, critics raise valid concerns about
potential risks and drawbacks. Ultimately, the debate about FDI underscores the complex trade-offs involved
in global economic integration and the importance of informed, nuanced decision-making to maximize its
positive impacts while minimizing its negative consequences.
India has been continuously undertaking policy reforms to attract more FDI and improve the ease of doing
business. In 2024, the government may introduce further reforms aimed at simplifying regulations, reducing
bureaucratic hurdles, and enhancing transparency to create a more favorable investment climate.
India may prioritize certain sectors for FDI inflows based on strategic considerations, economic priorities,
and emerging opportunities. Sectors such as technology, renewable energy, infrastructure, healthcare, and
manufacturing could receive special attention, with targeted policies and incentives to attract investment.
With the growing importance of the digital economy, India may introduce policies to encourage FDI in
digital infrastructure, e-commerce, fintech, and other technology-driven sectors. Regulatory frameworks
related to data privacy, cybersecurity, and digital payments could be revised to facilitate greater investment
and innovation in these areas.
Environmental, Social, and Governance (ESG) considerations are becoming increasingly important for
investors worldwide. India may emphasize sustainable development goals and environmental conservation
in its FDI policies, encouraging investment in renewable energy, clean technology, and green infrastructure
projects.
Changes in geopolitical dynamics could influence India's approach to FDI. Shifts in global alliances, trade
relations, and regional dynamics may impact investment flows and necessitate adjustments in policy
priorities to safeguard national interests and maintain economic stability.
In response to global trends, India may strengthen its FDI screening mechanisms to protect critical
infrastructure, strategic assets, and sensitive sectors from potential risks associated with foreign investment,
including national security concerns and undue influence.
India may intensify its efforts to promote investments through targeted marketing campaigns, investment
summits, and bilateral agreements with key trading partners and investors. Special economic zones,
industrial corridors, and investment promotion agencies could play a crucial role in attracting FDI to specific
regions and sectors.
In the aftermath of the COVID-19 pandemic, India may prioritize FDI policies aimed at revitalizing the
economy, supporting small and medium-sized enterprises (SMEs), and promoting resilience and self-
reliance in key sectors. Initiatives focused on healthcare infrastructure, digital transformation, and supply
chain resilience could feature prominently in post-pandemic recovery plans.
These are speculative considerations based on historical trends and potential future developments. Actual
changes in FDI policies in India for the year 2024 would depend on a variety of factors, including domestic
priorities, economic conditions, geopolitical dynamics, and global trends.
Future direction and research agenda of FDI

Investigating the mechanisms through which FDI contributes to technology transfer, innovation diffusion,
and knowledge spillovers in host economies. Future research could explore the role of multinational
corporations (MNCs) in promoting indigenous innovation, building research and development (R&D)
capabilities, and fostering collaboration with local firms and research institutions.
Examining the environmental, social, and governance (ESG) dimensions of FDI and its impact on
sustainable development outcomes. Research could focus on assessing the effectiveness of CSR initiatives
by multinational enterprises, analyzing their contribution to environmental conservation, social inclusion,
and ethical business practices, and identifying strategies to enhance corporate accountability and responsible
investment practices.
Investigating the implications of FDI for the digital economy, including investments in digital infrastructure,
e-commerce platforms, fintech startups, and digital transformation initiatives. Future research could explore
the role of FDI in shaping digital innovation ecosystems, addressing regulatory challenges related to data
privacy and cybersecurity, and harnessing the potential of digital technologies for inclusive growth and
economic development.
Analyzing the evolving dynamics of FDI within global value chains (GVCs) and its implications for trade
patterns, regional integration, and industrial restructuring. Research could examine how changes in trade
policies, technological advancements, and geopolitical developments influence the organization and
governance of GVCs, as well as the strategies adopted by multinational enterprises to adapt to shifting
market dynamics and regulatory environments,
Assessing the impact of geopolitical tensions, trade disputes, and regulatory uncertainties on FDI flows and
investment decisions. Future research could explore how geopolitical risks shape multinational enterprises'
investment strategies, risk management practices, and diversification efforts, as well as the role of
international institutions and diplomatic initiatives in mitigating cross-border investment challenges and
fostering cooperation among stakeholders.
Examining the unique characteristics, drivers, and challenges of FDI in emerging markets, frontier
economies, and least developed countries (LDCs). Research could focus on understanding the role of FDI in
promoting inclusive growth, poverty reduction, and sustainable development in these contexts, as well as
identifying policy interventions to enhance absorptive capacity, mitigate risks, and maximize the benefits of
foreign investment for local communities and economies.
Evaluating the effectiveness of FDI policies, regulatory frameworks, and investment promotion strategies in
attracting foreign investment and fostering sustainable development outcomes. Future research could assess
the impact of policy reforms on investment flows, business environment perceptions, and investor
confidence, as well as identify best practices and policy lessons from successful investment promotion
initiatives across different regions and sectors.
Advancing methodological approaches, analytical techniques, and data sources for studying FDI dynamics
and their implications. Research could explore the use of big data analytics, machine learning algorithms,
and geospatial analysis to analyze investment patterns, detect investment trends, and predict future FDI
flows. Improving data availability, quality, and transparency through international cooperation, data sharing
agreements, and standardized reporting frameworks is also critical for enhancing the rigor and reliability of
FDI research.
By addressing these research priorities and engaging in interdisciplinary collaboration, scholars,
policymakers, and practitioners can contribute to a deeper understanding of FDI dynamics, inform evidence-
based policy-making, and advance sustainable development goals in an increasingly interconnected and
dynamic global economy.
Chapter 3: Literature Review

"Foreign Direct Investment in India: An Empirical Analysis" by Pankaj Kumar Gupta and Sangeeta Bansal
(2017): This literature review examines the impact of FDI on economic growth, employment, and
technology transfer in India. The authors find that FDI has a positive impact on economic growth and
employment, but the technology transfer effects are less clear. Link:
https://www.researchgate.net/publication/317105367_Foreign_Direct_Investment_in_India_

An_Empirical_Analysis
"Foreign Direct Investment in India: Policies, Opportunities, and Challenges" by S. Mahendra Dev (2013):
This literature review provides an overview of FDI policies and trends in India, and examines the challenges
and opportunities for attracting more FDI. The author concludes that India needs to improve its
infrastructure, reduce regulatory barriers, and address corruption to attract more FDI. Link:
https://www.researchgate.net/publication/259279652_Foreign_Direct_Investment_in_India_

Policies_Opportunities_and_Challenges
"Foreign Direct Investment in India: A Critical Analysis of FDI from 1991-2005" by Krishna Reddy Chittedi
(2012): This literature review examines the trends in FDI inflows and outflows in India from 1991 to 2005,
and analyzes the impact of FDI on various sectors of the economy. The author finds that FDI has had a
positive impact on the Indian economy, but there are challenges related to infrastructure, labor laws, and
corruption that need to be addressed to attract more FDI. Link:
https://www.researchgate.net/publication/301067320_Foreign_Direct_Investment_in_India_
A_Critical_Analysis_of_FDI_from_1991-2005
 CHAPTER – 4 DATA ANALYSIS AND
INTERPRETATION

4.1 Introduction
Analysis is a crucial aspect of research. Analysis is a form of description of data Gathered in a systematic
and scientific way. Statistical analysis acts as a quantitative Link for communication of results. This chapter
reflects the research approach of Data collection for the present study. The data was processed and analysed
with the Help of MS- Word.
Description of data is done on the basis of each variable being Studied for the entire sample. The table
depicts the number/ percentage of Respondents’ views on each variable.
Following questions were asked to the people in Mumbai Region and their responses have been recorded in
the form of percentages and table below. Total 45 responses have been collected to know the Foreign direct
investment in India amongst older people in Mumbai Region. The Objectives and short explanation has also
been stated.
 1) Qualification
From the above diagram, the majority of the respondents are from under graduate suggesting that
will soon join the workforce in this country. Their knowledge of a foreign direct investment will be reflected in
their answers, allowing us to a certain whether or not they will invest a portion of their income in FDI.
 2) Age?

In this questionnaire, majority of the respondents are between the age group of 18 to 25, which means that the
knowledge and perspective of young people who make our countries future will be reflected in the question
asked to them.
3)
4) Are you aware about foreign direct investment?

Majority of the respondents are respondent in the pie chart are aware about the foreign direct investment.
10.5% of the population is ignorant about the foreign investments.
5) According to you, which is the best investment option?
According to the public response, majority of people have chosen India market this we can say most of
the people are unaware about foreign market.
6) What instruments do you prefer for receiving foreign investments in Indian company?
The majority of respondents believed that there should be more of equity share rather than fully
convertible preference, share and fully convertible debenture. They do believe that there is a chance for
future growth. Does this will be benefit them.
7) Is there is too much foreign direct investment FDI?
As seen in the above graph most people do not think that there is too much foreign direct investment
FDI while 55.3% of people think there is too much FDI.
8) Do you think the fuss is most about the jobs in FDI?

As expected, the majority of the respondent thing that there is issue in getting jobs in foreign direct markets.
However, many comment believe that there is no FUSS about the jobs in foreign markets.
 9) Do negotiated agreement help?
We may infer from the graph that slim majority of respondents do not agree with the negotiated agreements
while 76.3% agree at the negotiated agreements.
10)
11) Do you invest in foreign markets?
According to the above graph, it is clearly visible that the vast majority of respondents do believe that there
is a lot risk in foreign market. Most of the Indians believe in safe investments. Therefore, they mostly invest
in Indian markets.
12) Do you think a lot of risk is involved in FDI?

As estimated, we can see that only a very tiny percentage of respondents think there is not too much
danger in foreign market to invest while most think there is a lot of risk involved in foreign market.
13) Why is FDI so sensitive?

As seen in the graph nearly more than half of the respondents believe there are many government
reasons that’s why FDI is sensitive while 28.8% people think liberal capitalist.
 CHAPTER – 5 CONCLUSION AND SS SUGGESTION

5.1 Conclusion
Foreign Direct Investment (FDI) in India has been an important driver of economic growth and
development. Over the years, India has gradually opened up its economy to foreign investors, leading to a
significant increase in FDI inflows.
FDI inflows have contributed to the growth of various sectors such as manufacturing, services, and
infrastructure, among others. The inflow of FDI has also led to increased employment opportunities, transfer
of technology, and enhanced productivity.
Trends are just relative numbers which might differ from that of the original numbers. It only shows the
relation in the form of percentage growth over last year whereas the foreign direct investment keeps on
coming into the economy. There can be many factors responsible for such variations in the trends of foreign
direct investment inflows like economic, institutional and political factors. These factors include economic
growth of the country, market size, resource location, return on investment, inflation, government regulation,
political stability, tax policies and foreign exchange rate among others.
In recent years, India has been ranked among the top destinations for FDI, and the government has
undertaken several measures to attract foreign investment. These measures include simplification of
regulations, relaxation of FDI norms in various sectors, and improving the ease of doing business in the
country.
FDI-enabled plants are spread across various states with relatively high concentration in
Maharashtra, Gujarat, Tamil Nadu, Karnataka and West Bengal. A significant proportion (54 %) of
manufacturing plants is located in Class-3 cities. FDI-enabled service facilities have relatively high
concentration in Andhra Pradesh, Karnataka, Maharashtra, and Tamil Nadu.
The proportion of service facilities located in Class-3 cities is relatively less significant (35 %) vis-à-vis
manufacturing plants.
However, there are also some challenges that India faces in attracting FDI, including bureaucratic hurdles,
infrastructure bottlenecks, and regulatory complexities. The country also faces competition from other
emerging economies for FDI inflows.
Overall, FDI has played a significant role in India's economic development, and the country continues to
work towards improving its investment climate to attract more foreign investor.

5.2 Suggestions
Here are a few suggestions to further improve the FDI environment in India:
Simplify Regulations: The government should continue to simplify regulations and procedures for
foreign investors. This could include reducing the number of approvals required for FDI projects,
simplifying the tax system, and providing a clear and transparent regulatory environment.
Improve Infrastructure: The Indian government should focus on improving infrastructure in the country,
such as roads, ports, and airports. This will not only improve the overall investment climate but also
enhance the competitiveness of Indian businesses.
Increase Sectoral Participation: The government should encourage FDI in sectors such as agriculture,
education, and healthcare, where there is still significant untapped potential for investment.
Develop Human Capital: The government should also focus on developing human capital in the country,
such as improving the quality of education and vocational training. This will not only enhance the skills
of the local workforce but also make India an attractive destination for high-skilled FDI projects.
Promote R&D: The government should provide incentives for foreign investors to undertake research
and development activities in India. This will not only help to develop new technologies and products
but also create new jobs and industries.
Overall, India has made significant progress in attracting FDI, but there is still significant potential for
further growth. By implementing these suggestions, India can further improve its investment climate and
attract more foreign investors to the count
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