At the outset, the paper dwells on the ambiguities surrounding the definition and the non‐adherence of
international norms in measuring the FDI inflows. The study finds that portfolio investors and round-tripping
investments have been important contributors to India’s reported FDI inflows thus blurring the distinction between direct and portfolio investors on one hand and foreign and domestic investors on the other. These investors were also the ones which have exploited the tax haven route most. These observations acquire added significance in the context of the substantial fall in the inflows seen during 2010‐11.
...
FDI that is dominated by financial investments, though a little more stable than the portfolio investments through the stock market, cannot deliver the perceived advantages of FDI. The net result is that while much of the FDI cannot enhance India’s ability to earn foreign exchange through exports of goods and services and thus cover the current account gap on its own strength, large inflows of portfolio capital causes currency appreciation and erodes the competitiveness of domestic players. The falling share of manufacturing and even of IT and ITES means that there is less likelihood of FDI directly contributing to export earnings. India seems to have been caught in a trap wherein large inflows are regularly required in order to finance the current account deficit.
...
Even at the global level, the developmental impact of FDI is being given lesser importance notwithstanding the repeated assertions to the contrary in some fora. International data on FDI and its impact has never been unambiguous. If FDI has to deliver, it has to be defined precisely and chosen with care instead of treating it as generic capital flow. India should strengthen its information base that will allow a proper assessment of the impact that FDI can make on its development aspirations.
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Last edited by K S Chalapati Rao
March 27, 2011 | History
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Publish Date
2011
Publisher
Research and Information System for Developing Countries,
Institute for Studies in Industrial Development
Language
English
Pages
90
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India's FDI Inflows: Trends and Concepts
February 2011, Institute for Studies in Industrial Development
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India's FDI inflows: trends and concepts
2011, Research and Information System for Developing Countries, Institute for Studies in Industrial Development
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Book Details
Edition Notes
Includes bibliographical references (p. 69-78).
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added by K S Chalapati Rao.
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