Dukhabandhu Sahoo

An Economic Analysis of the Impact of Fdi on the Indian Economy: a Macro Level & Sectoral Level Analysis Dukhabandhu Sahoo

Foreign Direct Investment (FDI) is an investment made by Multi-National Enterprises (MNEs) or by a non-resident in an enterprise of host (recipient) countries over which they can a have control and earn private returns. It is important to note that developing countries significantly eased restrictions on FDI inflows and operations of MNEs in early 1980s. This trend became even more widespread during the 1990s, which brought a significant FDI inflow into developing countries. In fact, developing countries received nearly 40 per cent global FDI inflows in 1994-96, compared to 25 per cent in 1980-84. This trend of growing share of developing countries kept on increasing till 1999-00, but it came down to 30 per cent during 2001-02. Within the group of developing countries, the distribution of FDI flows varied significantly both across regional groupings and individual countries. Of the developing countries, China has been receiving the largest share of FDI since 1992 and India has been placed in the 7th spot in 2002. In fact, India opened up its economy and allowed MNEs in the core sectors as part of reform process in the beginning of 1990s.