IDEAS home Printed from
   My bibliography  Save this article

Foreign Direct Investment and Economic Development of India: A Diagnostic Study


  • A S Shiralashetti
  • S S Hugar


Capital is the life blood of any production and distribution activity, and it plays an important role among the factors of production. The need of capital arises not only at the beginning of the venture, but also throughout the life span of the venture. However, capital, especially when in short supply, can be the limiting factor for starting, expansion and diversification of a venture. In view of the economic crisis on the one hand, and the perceived importance of foreign capital in the economic development of the country on the other, the Government of India has been making continuous efforts to attract foreign capital during the post-liberalization period. The efforts include providing concessions in taxes, announcing tax holidays and increasing the investment cap in various sectors of the Indian economy. As a result of the continuous efforts by the Government of India, there has been steady rise in the inflow of foreign capital on the one hand, and overall progress in various sectors of the Indian economy on the other. According to the Reserve Bank of India (RBI), India has received total Foreign Direct Investment (FDI) inflows of $50.1 bn since 1991. There has been tremendous progress in the various sectors of the Indian economy due to the inflow of foreign capital. The GDP growth rate has crossed 9% due to boom in manufacturing and service industries. Further, the Sensex points in Indian stock market have crossed 19, 000 points on October 15, 2007. In addition, the foreign exchange reserves have crossed $204 bn at the beginning of May, 2007. In addition, there has been improvement in the employment position, standard of living, infrastructure development, health and hygiene, GDP and NDP due to FDI inflows in India. The main objectives of the present study are: 1) To examine the year-wise, country-wise, sector-wise and the RBI’s region-wise FDI inflows in India, 2) To examine the impact of FDI on the growth of GDP and contributions from various sectors of economy towards GDP, 3) To analyze the trends in exports, and 4) To examine the impact of FDI on employment position, inflation and stock market of India. The study is primarily based on secondary data collected from websites, journals and newspapers. Statistical tools like percentage, common size statements and trend analysis are used to analyze the data.

Suggested Citation

  • A S Shiralashetti & S S Hugar, 2009. "Foreign Direct Investment and Economic Development of India: A Diagnostic Study," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(1), pages 54-69, February.
  • Handle: RePEc:icf:icfjme:v:07:y:2009:i:1:p:54-69

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Henry, TULKENS & Parkash, CHANDER, 2006. "Cooperation, stability and self-enforcement in interational environmental agreements : a conceptual discussion," Discussion Papers (ECON - Département des Sciences Economiques) 2006003, Université catholique de Louvain, Département des Sciences Economiques, revised 15 Jan 2006.
    2. Asheim, Geir B. & Froyn, Camilla Bretteville & Hovi, Jon & Menz, Fredric C., 2006. "Regional versus global cooperation for climate control," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 93-109, January.
    3. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2006. "Stable International Environmental Agreements: An Analytical Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 247-263, May.
    4. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, "undated". "International Environmental Agreements -The Role of Foresight," Economics Working Papers 2002-10, Department of Economics and Business Economics, Aarhus University.
    5. Carlo Carraro & Johan Eyckmans & Michael Finus, 2006. "Optimal transfers and participation decisions in international environmental agreements," The Review of International Organizations, Springer, vol. 1(4), pages 379-396, December.
    6. Yuan Ju & Peter Borm & Pieter Ruys, 2007. "The consensus value: a new solution concept for cooperative games," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(4), pages 685-703, June.
    7. Henry Tulkens & Parkash Chander, 1997. "The Core of an Economy with Multilateral Environmental Externalities," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(3), pages 379-401.
    8. Parkash Chander & Henry Tulkens, 1995. "A core-theoretic solution for the design of cooperative agreements on transfrontier pollution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 279-293, August.
    9. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    10. Dritan Osmani & Richard Tol, 2009. "Toward Farsightedly Stable International Environmental Agreements," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(3), pages 455-492, June.
    11. Ioannidis, Alexis & Papandreou, Andreas & Sartzetakis, Eftichios, 2000. "International Environmental Agreements: a Literature Review," Cahiers de recherche 0008, GREEN.
    12. Dritan Osmani & Richard S.J. Tol, 2005. "The case of two self-enforcing international agreements for environmental protection," Working Papers FNU-82, Research unit Sustainability and Global Change, Hamburg University, revised May 2006.
    13. Tol, Richard S. J., 2001. "Equitable cost-benefit analysis of climate change policies," Ecological Economics, Elsevier, vol. 36(1), pages 71-85, January.
    14. Dritan Osmani & Richard S.J. Tol, 2007. "Toward Farsightedly Stable International Environmental Agreements, Part two," Working Papers FNU-149, Research unit Sustainability and Global Change, Hamburg University, revised Oct 2007.
    15. Johan Eyckmans, 2001. "On the farsighted stability of the Kyoto Protocol," Energy, Transport and Environment Working Papers Series ete0103, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjme:v:07:y:2009:i:1:p:54-69. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.