A Study on Foreign Direct Investment in India During Post Liberalization Era

Abstract

Now-a-days role of foreign direct investment (FDI) is noteworthy. It acts as the lifeblood of growth. The flow of FDI to a country reflects its potential in the globe. Today, FDI is a buzzword in the Indian economic environment. After the liberalization of economy, Indian government has recognized the significance of FDI and formulated selective approach to attract FDI. The approach is governed by multiple objectives such as self-reliance, protection of national industry and entrepreneurs, import of select technologies and export promotion. Many foreign countries are fascinated to invest in the Indian economy due to its high potential for growth. This influences all the sectors in the economy. In recent times, telecommunications, real estate, print and electronic media, banking, tourism and hotel industry have registered an incredible growth in the country. The growth of gross domestic product (GDP) in the last two quarters of 2006 was in the range of 8.5 to 9.2 percent. In this, service sector accounted for a greater part. This may be one of the best indications for attracting FDI into the economy. Furthermore, it is reported that the remarkable growth in service sector and GDP is due to the inflow of FDI into various sectors of the economy. FDI not only facilitates the inflow of funds but also transferring the technology, innovative management and marketing expertise. Besides, helps expand host country market and foreign trade1. In this paper, an earnest attempt is made to analyse the trend in the FDI during post liberalization period and its impact.

Keywords: FDI, Fund Flow, Liberlisation

JEL Classification: F10, F14, F31