Foreign Direct Investment

Foreign Investment In Multinational Corporations

Indian Economic Journey ØInternational Trade ØIndia in the Economic Race ØBased on Debt-Creating Capital Inflows ØEconomic Reforms-1991 ØPost-1991

FOREIGN PORTFOLIO INVESTMENT Important Reduces

type of capital flow

risks

Liberalization Accounts

plays important role

for one third of net capital flows

BENEFITS Helps

in reduces risks

Developing

countries considered it as welcome means for raising capital

Provide

finance

FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENT

Merits of FDI No

burden on tax payers

Part

of profits are ploughed in business

FDI

in Exports

Flexible FDI

returns in direct investment

makes a major contribution to

Liberalization phase of FDI THREE PROBLEMS IN 1980s (1) EXTERNAL COMMERCIAL BORROWING (2) EXTERNAL ASSISTANCE (3) INFLOW UNDER NON-RESIDENT BANK DEPOSIT

FII permitted – 40% equity capital of a business enterprise

Contd…. FDI allowed – 51% of equity capital in 34 industries 100% PARTICIPATION IN EXPORT ORIENTED units (eous) Infrastructure 49% in telecommunications 50% in mining 50% in hotel & tourism allowed under automatic route 100% was permitted for all manufacturing activities.

FDI Flows in India

Role of multinational corporations in Indian economy.

Post reforms period •Promotion of foreign investment. •Non-debt creating capital inflows. •Technology transfer. •Promotion of exports.

Role of multinational corporations Agreement

with local firms for sale of MNCs products.

Setting

up of subsidiaries.

Branches

multinational corporation.

Foreign

collaboration or joint ventures.

world’s some important nonfinancial multinational

Critique of MNC’s  Capturing  Capital

Markets

intensive techniques

 Inessential  Import

consumption

of obsolete technology

 Polluting

environment

 Volatility

in Exchange rates

Conclusion Growth Restrictions Foreign

Currency

Standard Global

of living

Market

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