Explain the pattern & structure of foreign investment in India. Also explain its effects.
Answers
Foreign investment had played a very limited role in India’s economy prior
to 1991. India followed a fairly restrictive foreign private investment policy until
1991- relying more on bilateral and multilateral loans with long maturities. Inward
foreign direct investment was perceived essentially as a means of acquiring
industrial technology that was unavailable through licensing agreements and
capital goods import.
Foreign investment is a source of additional external finance augmenting
fixed investment, potential output and employment. Foreign direct investment
(FDI) is now widely perceived as an important resource for expediting the
industrial development of developing countries in view of the fact that it flows as a
bundle of capital, technology, skills and some times even market access.