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Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 5
May 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 177
Foreign Investment Inflows: Strengthening Indian Economy
Naib Singh
Assistant Professor,Deptt. of Commerce,Rajiv Gandhi Govt. College, Saha-(Haryana)
Abstract
Foreign Investment is essential for assisting
the economic growth. FDI facilitates in the
country the infrastructure, technology, skill,
motivation and foreign entrepreneurship.
Government of India is promoting the
foreign direct investment in the country by
opening more and more sector for the
investment. Foreign investment increases
the MNC culture in the country that is very
important for India in this competitive era.
Union budget of 2016-17 has proposed the
reforms in the FDI policy in the area of
asset reconstruction companies, insurance,
pensions and stock exchanges etc. Foreign
investment is supporting the economy of
India by inflow of FDI and portfolio
investment in the significant manner.
Key Words: Foreign Investment,
Government Route, Automatic Route,
Foreign Investment Promotion Board
(FIPB).
Introduction
Foreign investment has the great role to play
in the economic development of any
country. The nation has to procure its
foreign exchange reserves for the investment
in infrastructure, industry, agriculture and
other schemes. For making the payment of
imports, the Government also needs the
foreign exchange reserves. Foreign
investment increases the infrastructure in the
country that in turn supports the growth
process of all the core sector industries.
Design and Methodology
The present paper is divided into three main
parts. First part describes the brief
introduction of the concept. Middle part of
the study is related to the trends of foreign
investment in India. Discussion is placed in
the ending part of the paper. Secondary data
has been used for analysing the foreign
investment inflows during the period of
various years.
Objectives of the Study
The objective of this paper is to study the
effect of foreign investment on Indian
economy by considering its inflows in the
country. For this purpose, both the forms of
foreign investment i.e. foreign direct
investment and portfolio investment have
been considered.
Foreign Investment in India
Foreign investment supports the base of the
economy by boosting the growth
opportunities. Foreign investment can be
categorized into two main categories as
follows:
Page 2 of 5
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 5
May 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 178
Foreign direct investment and portfolio
investment has been described in the
following section of the paper.
Foreign Direct Investment (FDI) is playing
significant role in the every sector of
economy. FDI can be understood as the
investment of capital by the foreign
investors in domestic country. Foreign
investors invest this capital directly in the
industrial and other sectors. In India,
foreign direct investment (FDI) has the two
routes through which it can be invested in
the country as follows:
Government Route: When the permission
is required of the Government of India for
the foreign investor, then this type of FDI
comes under the category of Government
Route. Foreign investor has to obtain the
approval for this type of investment from the
Foreign Investment Promotion Board
(FIPB).
Automatic Route: Automatic route is
another way of investment in India, by a
foreign investor. Under this route, the
foreign investor can invest in the India
without permission of the Government. The
sectors in which the foreign investment does
not require prior permission of the
Government is specified in the consolidated
FDI policy that is issued by the Government
of India from time to time. More than 85%
of the FDI is invested by the foreign firms
through automatic route.
Foreign portfolio investment is opposite to
foreign direct investment. In this investment
system, the foreign company does not invest
directly in the Indian company. This type of
FOREIGN
INVESTMENT
Foreign Direct
Investment
Foreign
Portfolio
Investment
Government
Route
Automatic Route
Foriegn
Direct
Investment
Page 3 of 5
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 5
May 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 179
investment is done generally in the securities
and other similar type of transactions. Table
1 shows the inflows of foreign investment in
India:
Table 1: Trends of Foreign Investment in India (Rs. Crore)
Year Foreign Direct Investment (Net) Portfolio investment (Net)
2000-01 14924 11820
2009-10 85983 153967
2010-11 54101 139381
2011-12 103167 85571
2012-13 108186 146467
2013-14 PR 129969 29680
2014-15 P 191219 257853
2015-16
(April-September) P
106680 -56472
PR: Partially Revised, P: Preliminary
Economic Survey, 2015-16
Table 1 reflects that, the foreign investment
in India is increasing at the significant rate.
In the year, 2014-15 total foreign direct
investment of Rs. 191219 was recorded in
the country. Portfolio investment was also
higher in this year i.e. Rs. 257853. But in
year 2015-16, the portfolio investment
decreased which is not good for the Indian
economy.
Government of India is promoting the
foreign direct investment in the country by
opening more and more sector for the
investment. As per the Review 2014 of the
Foreign Investment Promotion Board (FIPB)
of Government of India, the top ten foreign
countries which has invested in India
through foreign direct investment include
Singapore, Japan, USA, Cyprus, France
Mauritius U.K. Netherlands, Cyprus and
Switzerland.
A very considerable advantage of the FDI is
its non-debt nature. Various supportive
measures have been taken by the
Government of India for promoting the FDI
in the country in the various sectors like
public sector oil refineries, telecom, defence,
power exchanges, stock exchanges and other
sectors. Union budget of 2016-17 has
proposed the reforms in the FDI policy in
the area of asset reconstruction companies,
insurance, pensions and stock exchanges etc.
Now foreign institutional investment can be
increased in the private banking sector up to
74 percent.
Foreign investment increases the MNC
culture in the country. Multinational
corporations facilitate the transfer of
technology, capital and entrepreneurship,
job opportunities, competition and the
availability of products for the local
consumers.
