Abstract Inflow of Foreign Direct Investment in India: An Analysis Amandeep Kaur* Researcher Department of Economics Punjabi University Patiala Foreign direct investment is a major source of finance in an economy. In these days, developing countries like India have keen interest to attract FDI due to lack of domestic investment funds. FDI offers number of benefits like technological advancement, innovative products; and extension of new markets. More over with high inflow of FDI opportunities of employment also increases which reflect in the growth of income of the host nation. The objective of the study is to investigate FDI inflows in India during recent years and to find out the main countries which are contributed in FDI in India. The study concludes that Mauritius is the biggest source of FDI for India and inflow of FDI is increasing with time. Keywords: FDI, Net FDI, Sources of FDI, Inflow of FDI. Introduction In recent time FDI has a vital role in the growth of both developing and developed countries. FDI has been associated with improved economic growth and development in the host countries which led to the emergence of global competition to attract more FDI inflows. FDI offers number of benefits like technological advancement, innovative products; and extension of new markets. More over with high inflow of FDI opportunities of employment also increases which reflect in the growth of income of the host nation. Foreign direct investment is one of the measures of growing economic globalization. In developing economies like India, funds for Investment have always been an issue due to lack of finance sources. Thus, all the countries are liberalizing their policies to attract funds for investment from countries which are financially sound. Developed countries often attract towards new markets where there is availability of abundant labor at reasonable price, market for product; and high profits can be achieved. Therefore, to attract Foreign Direct Investment (FDI) has become a major priority for the emerging markets. Review of Literature Azhar and Marimuthu (2012) in their paper titled, An overview of foreign direct investment in India, attempted to make an analysis of FDI in India and its impact on growth. It also focuses on the determinants and needs of FDI, year-wise analysis, sectoral analysis and sources of FDI and reasons. One of the economic aspects of globalization is the fact that increasing investments in the form of foreign direct investments. In the recent times due to the global recession most of the countries have not been able to pull investments. India has been able to attract better FDI s than the developed countries even during the crisis period also. Especially in the recent years the FDI in India has been following a positive growth rate. Since 1991 the government has focused on liberalization of policies to welcome foreign direct investments. These investments have been a key driver for accelerating the economic growth through technology transfer, employment generation, and improved access to 37 The research journal of social sciences October 2018 volume 9 number 10
managerial expertise, global capital, product markets and distribution network. FDI in India has enabled to achieve a certain degree of financial stability; growth and development to sustain and compete in the global economy. Mohan (2014) in his research paper FDI and Indian Economic growth factors-an Empirical Analysis- 2014 described that the main determinant of FDI are inflows to the country trade, GDP, Reserves, Exchange rate are. Finally, his study found out that FDI is a significant factor influencing the economic growth in India and It also contributes to the GDP and foreign exchange reserves of the country. Chengalvala (2017) in their paper entitled Empirical Analysis of Foreign Direct Investment (FDI) Inflows into Indian Economy done an empirical analysis of FDI inflows into Indian economy is accessible for the period April 2000 to March 2017. The study found out that there had been a steady increase in the FDI inflow into India during the period considered for research. Jonardankoner et al.., (2018) in their paper titled Impact of Foreign Direct Investment (FDI) on The Growth of The Indian Economy investigated the impact of FDI inflows on the Services, Construction, Trading, Mining; and Agricultural Sectors in India. The study concluded a positive impact of FDI inflow on the GDP of India. To earn more benefits from FDI, policy makers have to design strategies to attract more foreign direct investment in India. Objectives 1. To investigate FDI inflows in India during recent years. 2. To find out the main sources of FDI for India. 3. To suggest the policy measures to improve FDI inflow in India. Methodology The present study aims to indentify the trend of FDI inflow in India and the main sources of FDI. To fulfill all above said objectives data has been gathered from secondary sources like reports and publication of Government of India, annual reports of RBI, OECD annual reports. The collected data has been presented in tabulated form and figures are made with the help of MS-word where ever is necessary. Table1: Foreign Direct Investment Inflow in India Year FDI inflow 2012-13 28,153 2013-14 34,576 2014-15 44,008 2015-16 44,458 2016-17 39,966 Average 38232.2 Source: OECD. 38 The research journal of social sciences October 2018 volume 9 number 10
The above table indicates the inflow of FDI in India from 2013 to 2017. It is apparent from the above table that FDI has been increased from USD 28,153 in year 2012-13 to USD 39,966.6 in 2016-17. This increase in FDI witnessed that growth took place in the inflow of FDI during the study period. Net foreign direct investment-quarterly is represented with the help of table 2. It is apparent from the table that FDI inflow increased from USD 5.7 million in first quarter of 2013 to USD 7.4milion the first quarter of 2018. There is a fluctuating trend in the years between the years 2013 to 2018 this is due to global policy changes. The Government of India is doing well on enhancing the infrastructure facilities that is one of the reasons behind increased rate of investment inflow in India. Apart from this, cheap and abundant labour availability attract the investment of Multinational Corporations. Table 2: Net Foreign Direct Investment-Quarterly inflow in India Q1 2013 5.7 Q2 2013 6.5 Q3 2013 8.1 Q4 2013 6.1 Q1 2014 0.9 Q2 2014 7.6 Q3 2014 7.5 Q4 2014 6.9 Q1 2015 9.3 Q2 2015 10 Q3 2015 6.5 Q4 2015 10.7 Q1 2016 8.8 Q2 2016 3.9 Q3 2016 17 Q4 2016 9.7 Q1 2017 5 Q2 2017 7.1 Q3 2017 12.4 Q4 2017 4.3 Q1 2018 7.4 Source: OECD. Table 2: Country-Wise Inflow of Foreign Direct Investment in India Source of FDI 2013-14 2014-15 2015-16 2016-17 2017-18 P Mauritius 3,695 5,878 7,452 13,383 13,415 Singapore 4,415 5,137 12,479 6,529 9,273 Netherlands 1,157 2,154 2,330 3,234 2,677 39 The research journal of social sciences October 2018 volume 9 number 10
Mauritius Singapore Netherlands USA Japan Cayman Islands Germany Hong Kong United Kingdom Switzerland UAE France China Italy South Korea Cyprus Canada Others www.aensi.in /Index in Cosmos USA 617 1,981 4,124 2,138 1,973 Japan 1,795 2,019 1,818 4,237 1,313 Cayman Islands 25 72 440 49 1,140 Germany 650 942 927 845 1,095 Hong Kong 85 325 344 134 1,044 United Kingdom 111 1,891 842 1,301 716 Source: RBI. Switzerland 356 292 195 502 506 UAE 239 327 961 645 408 France 229 347 392 487 403 China 121 505 461 198 350 Italy 185 167 279 364 308 South Korea 189 138 241 466 293 Cyprus 546 737 488 282 290 Canada 11 153 52 32 274 Others 1,626 1,682 2,243 1,490 1,889 Total FDI 16,054 24,748 36,068 36,317 37,366 The above table indicates FDI inflow from various nations to India.FDI inflows to India grew significantly over the years and India has been ranked among the top 10 attractive destinations for inbound investments. it is clear from the table and figure 1 that Mauritius and Singapore are investing highest in India during the study period and USA stands on third position to invest directly in India. The years 2013-14 and 2015-16 were the years to attract maximum FDI. Figure 1: Foreign Direct Investment Flows To India: Country-Wise 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2013-14 2014-15 2015-16 2016-17 2017-18 P 40 The research journal of social sciences October 2018 volume 9 number 10
Table 2: Sector-wise inflow of FDI in India Industry 2013-14 2014-15 2015-16 2016-17 2017-18 P Communication Services 1,256 1,075 2,638 5,876 8,809 Manufacturing 6,381 9,613 8,439 11,972 7,066 Retail & Wholesale Trade 1,139 2,551 3,998 2,771 4,478 Financial Services 1,026 3,075 3,547 3,732 4,070 Computer Services 934 2,154 4,319 1,937 3,173 Business services 521 680 3,031 2,684 3,005 Electricity and other energy 1,284 1,284 1,364 1,722 1,870 Generation, Distribution & Transmission Construction 1,276 1,640 4,141 1,564 1,281 Transport 311 482 1,363 891 1,267 Miscellaneous Services 941 586 1,022 1,816 835 Restaurants and Hotels 361 686 889 430 452 Real Estate Activities 201 202 112 105 405 Education, Research & 107 131 394 205 347 Development Mining 24 129 596 141 82 Trading 0 228 0 0 0 Others 293 232 215 470 226 Note: P: Provisional. Note: Includes FDI through SIA/FIPB and RBI routes only. Source: RBI. The figure 2 and table 2 indicates that the highest FDI attractive sector is manufacturing sector in 2015-16 which is followed by communication services sector. Trading is found as least attractive sector for FDI. The Government of India is providing great incentives to the organizations which are interested in investing in India. Recently, Government has liberalize FDI policy to attract more FDI in India. 41 The research journal of social sciences October 2018 volume 9 number 10
Figure 2: Foreign Direct Investment Flows to India: Industry-Wise 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2013-14 2014-15 2015-16 2016-17 2017-18 P Conclusions and Policy Recommendations In recent time, FDI is major source of investment in developing countries. Thus, developing countries are doing their best to attract foreign investment. India is one of the attractive designations to do FDI and Multinational corporations are earning abundant profits from India by investing in manufacturing and services sector. During the study period, it is found that services sector and industrial sectors are the major sectors to attract FDI. The country wise analysis of FDI shows that Mauritius and Singapore are investing more in India; and USA has third position in terms of foreign direct investment in India. The Government is providing many incentives on FDI. However, there is need to develop the infrastructure facilities in rural parts of the country so that the benefit of foreign investment reaches to the least benefited sector of the society. References 1. Azhar Syed and Marimuthu (2012) K.N., An Overview Of Foreign Direct Investment In India, EXCEL International Journal of Multidisciplinary Management Studies, Vol.2, Issue.1, PP. 202-214. 2. Jonardankoner et al.., (2018) Impact of Foreign Direct Investment (FDI) on The Growth of The Indian Economy IOSR Journal of Business and Management, PP.35-39. 3. M. Kumar Mahesh (2014), FDI and Indian Economic growth factors-an Empirical Analysis- 2014 International Journal of Management and Commerce Innovations, Vol.2, Issue.1, PP. 7-18. 4. Chengalvala (2017), Empirical Analysis of Foreign Direct Investment (FDI) Inflows into Indian Economy International Research Journal of Management and Commerce, Vol. 4, Issue 6, PP. 154-160. 5. www.oecd.org 6. www.rbi.org.in 42 The research journal of social sciences October 2018 volume 9 number 10