The document discusses foreign direct investment (FDI) in India. It begins by defining FDI and its importance as a source of capital, jobs, and technology for developing countries like India. However, FDI in India has been limited to certain areas and not well distributed across states. The government aims to attract more equitable FDI across states to stimulate productivity and exports. While FDI inflows to India have increased in recent decades, it still lags behind other countries. The distribution of FDI among Indian states is also highly concentrated, with 75% going to just a few states. More needs to be done to distribute FDI more evenly and attract investment to less developed areas.

1. 3RESEARCH ANALYSIS AND EVALUATION
International Indexed & Refereed Research Journal, ISSN 0975-3486, (Print) E-ISSN-2320-5482, July,2013 VOL-IV *ISSUE- 46
Introduction
FDIisadirectinvestmentbyacompanyfrom
another country into the production or business in a
country, either by buying a company in the country or
by expanding of an existing business in that country.
IMFin1977defined FDIastheinvestmentthatismade
to acquire a lasting interest in an enterprise operating
in an economy other than that of the investor. FDI
corresponds with the investment undertaken by a mul-
tinationalenterpriseinaforeigncountry(Mithani,2012)
.FDIexistintwo differentforms,thefirstoneinvolves
with establishment of a new operation in a foreign
country while the second involves with acquiring or
mergingwithanexistingfirmintheforeigncountry.FDI
doesnotinclude portfolio investmentinthe securityof
another country such as stocks and bonds.
Review of Literature
Weisskof T.E. (1972) argues that FDI has a
negative impact on the growth of Indian because FDI
flowsmainlytowardstheprimarysectorswhilebasically
promoted the less market value. However, it is again
argued thatFDIinflowinto thecoresectorsisassumed
to play a vital role as a source of capital, management
and technology in countries transaction economy
(Sahoo,Parida,2002).Accordingto KrauseW(1965)
, in the long run, when the borrower country's
productivity and increases with the help of foreign
capital, their import propensity may increase which
mayhelpinpushinguptheexportofthelendingcountry.
Role of FDI inIndia
ForeignDirectInvestment(FDI)asastrategic
component of investment is needed by India for its
sustained economic growth and development through
creation of jobs, expansion of existing manufacturing
industries, short and long term project in the field of
healthcare,education,researchand development(R&
D) etc.Government should design theFDI policysuch
a way where FDI inflow can be utilized as means of
enhancing domestic production, savings and exports
Research Paper—Commerce
July ,2013
ForeignDirectInvestmentinIndia
* Dr. Kh. Dhiren Meetei ** O. Deepakkumar
*Asst.Prof. Dept.ofCommerce,ManipurUniversity,Canchipur-03
**ResearchScholar,Dept.ofCommerce,ManipurUniversity,Canchipur-03
India has emerged as an attractive investment destination. FDI is the most important form of investment destination. FDI
is the most important form of foreign investment in a developing country like India. But the aspect of FDI are so far not
localized and limited to some particular areas. The importance of FDI should be to stimulate the productivity and export
while scattering the investment location in all the states.
A B S T R A C T
through the equitable distribution among states by
providing much freedom to states, so that they can
attractFDIinflowsattheirownlevel(Devjit,2012).The
significance of capital movement lies in the fact that,
such movement may tend to affect the incomes of
countries involved as capital flows induce changes in
investment expenditure which determines the level of
incomeandwhenthelevelofincomeisaffectedchanges
in the level of imports and exports of the countries
concerned may also be caused due to their being the
functions of income.
Employment In India
AsurveyconductedbytheMinistryofLabour
indicates that during the last quarter, employment in
the industry rose to 15.72 million. The research re-
vealed that two sectors have shown the strongest
improvementintermsofhiringlevels,informationtech-
nology and business process outsourcing. FDI has
helped to raise the output, productivity and employ-
ment is some sectors especially in service sector, In-
dian service sector is generating the proper employ-
ment options for skilled workers with high perk
(Deshmukh,2012).
ForeignInvestmentInIndia
The major effort of the government to attract
foreign direct investment in India was outlined in the
Industrial Policy Statement of 1991. Since then there
was a sustained growth of direct investment inflows
fromUS$97millionin1990-91toUS$3904millionin
2001-02andUS$4660millionin2002-03.Companies
registered in Mauritius, Singapore, USA, UK and
Netherland account for the bulk of the foreign direct
investment. 42.16 per cent of the total FDI inflow in
India is solely contributed by Mauritius.
According to UNCTAD (2007) , India has
emerged as the second most attractive destination for
FDIafterChinaandaheadoftheUS,RussiaandBrazil.
While India has experienced a marked rise in FDI in-

2. 4 RESEARCH ANALYSIS AND EVALUATION
International Indexed & Refereed Research Journal, ISSN 0975-3486, (Print) E-ISSN-2320-5482, July,2013 VOL-IV *ISSUE- 46
flows in the last few years (doubling from an average
of US$5-6 billion the previous three years to around
US$ 19billionin2006-07),itstillreceivesfarlessFDI
flows than China or much smaller economies in Asia
likeHongKongandSingaporewasahead ofIndia.Not
surprisingly India's growth strategy has depended
predominantly on domestic enterprises and domestic
demandasopposedtoFDIandexportdemand.Foreign
Investment may prove to be an additional source of
supply of raises the purchasing power of borrowing
nations in the foreign market which may enable the
lender country to increase its exports. And when it is
a tied loan with a condition that the proceeds should
be spent only in the lending country, it will definitely
be a means for enhancing its exports.
Table No. 1 Foreign Investment in India
YEAR FDI US $ Portfolio Investment
million US $ million
1994-95 1314 3824
1995-96 2133 2748
1996-97 2821 3312
1997-98 3557 1828
2000-01 4029 2760
2001-02 6151 2021
2002-03 4660 979
2003-04 4675 11377
2005-06 8961 12492
2008-09 35168 -13855
Sources: RBI Annual Report
Table No. 2 Sources of FDI In India
Country FDI in Rs. (Crore) FDI in US $ (Million) Percentage of Total FDI
Mauritius 231428.6 51719.5 42.16
Singapore 50961.66 1471.9 9.35
USA 41357.41 9186.37 7.49
UK 27569.08 6225.58 5.07
Neherland 23613.63 5254.89 4.28
Cyprus 19733.74 4322.36 3.52
Japan 19547.36 4300.29 3.51
Germany 12848.04 2881.92 2.35
France 8403.64 1851.48 1.51
UAE 8255.88 1815.29 1.48
Sources: Ministry of Commerce and Industry, Govt. of India
Conclusion
FDI in India are not evenly distributed due to
infrastructural facilities and favourable business envi-
ronment in different regions. 75 per cent of the total
inflows of FDI, during 2000- 2010 are concentrated in
thestateofMaharashtra,Delhi,Karnataka,Gujaratand
Tamil Nadu. It can be mentioned worthwhile that the
government should simplify and relax entry barrier for
business activities and providing investor friendly law
and tax systemfor foreign investors, which may in turn
scatter it to the less developed states of the country,
wherethereislessprovisionforinvestment.Thepolicy
of FDI should be designed to enhance domestic pro-
duction, saving and exports through the equitable dis-
tribution among the states by providing much freedom
to states so that they can attract FDI inflows at their
own level.
1 Mithani D.M. (2012), International Economics, Himalayan Publishing House, New Delhi.
2 Weisskof T.E. (1972), The impact of Foreign Capital Inflow on Domestic Savings in Underdeveloped Countries, Journal
of International Economics, 2.
3 Sahoo and Parida (2002), Is Foreign Direct Investment an Engine of Growth? Evidence from the Chinese Economy,
Savings and Development, 4.
4 Krause W. (1965), International Economics, Houghton Mifflin Co., New York.
5 Devjit (2012), Impact of Foreign Direct Investment on Indian Economy, Research Journal of Management Sciences,
September, Vol. 1(2)
6 Deshmukh (2012), Effect of FDI on Employment Generation, Research Analysis and Evaluation, February, Vol. III,
Issue 29.
7 UNCTAD (2007), World Investment Report 2007, New York and Geneva, Oxford University Press.
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