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Foreign Direct Investment in India: Emerging Trends and Patterns

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  • P Rajesh

    (Government Engineering College, Thrissur)

Abstract

This paper examines the trends in foreign direct investment (FDI) in India during 1980-2018 and the emerging patterns of the FDI inflows in the country during the last two decades (i.e., 2000 - 2019). Our analysis, based on the secondary data collected from UNCTAD and DPIIT, reveals that the ongoing FDI liberalization measures started in India since 1991 have resulted in a dramatic upsurge in the FDI inflows as well as a stock of FDI in the country. The share of India in the global FDI inflows has increased in the post-liberalization period. Still, there was no perceptible increase in India’s share in the global FDI stock during this period. Detailed examination of the patterns of the FDI inflows in India revealed that the equity capital had been the largest component of the FDI in India. Moreover, its share in the total FDI inflows has been increasing during 2000 and 2019. Mauritius and Singapore have been the two important sources of FDI inflows into India, contributing more than half of the FDI flows during the last two decades; this was mainly because these countries were considered as tax heavens for investors from other counties for routing their investments to India. Sector-wise distribution of FDI in India during the last two decades of the post-liberalization period (i.e., during 2000 - 2019) has shown that the service sector has emerged the largest recipient of FDI replacing the manufacturing sector. Our analysis has clearly shown the impact of liberalization on enhancing the FDI flows as well as stock in India and also in changing patterns of FDI distribution in the country.

Suggested Citation

  • P Rajesh, 2020. "Foreign Direct Investment in India: Emerging Trends and Patterns," Shanlax International Journal of Economics, Shanlax Journals, vol. 8(3), pages 38-46, June.
    • Handle: RePEc:acg:journl:v:8:y:2020:i:3:p:38-46
    DOI: 10.34293/economics.v8i3.2992
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    References listed on IDEAS

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    1. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    2. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521860130.
    3. Suma Athreye & Sandeep Kapur, 2001. "Private Foreign Investment in India: Pain or Panacea?," The World Economy, Wiley Blackwell, vol. 24(3), pages 399-424, March.
    4. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521677530.
    5. Vani Archana & N. C. Nayak & P. Basu, 2007. "Foreign Direct Investment in India: Emerging Horizon," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 42(2), pages 225-266, July.
    6. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, School of Economics, University of Kent.
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