Role of FDI in Economic Development of India

INTRODUCTION

FDI has been acting as a development driver in the past and more in recent days. The newly industrialized Asian economies such as Singapore, South Korea, Taiwan and Hong Kong have adopted an outward-looking growth strategy which enables them to overcome the limitations of the least resource-developing economies. In India too, FDI has become a driver for economic development. FDI leads in several respects to the mechanism of global growth – The acquisition of capital products with exchange is possible. It is a method of maintaining market stability. It creates complex transition forces and pulls. It is possible to allow maximum use of capacity, leverage economies of scale and diversification. International direct investment is investment in domestic structures, infrastructure and organizations with foreign properties. Foreign funding is not allowed on capital exchanges. It is particularly essential for its ability to move information and technologies, build employment, improve production overall, increase competitiveness and entrepreneurship and eventually end poverty by means of economic growth and development. India continues to suffer from political and regulatory weaknesses and constraints that limit FDI inflows. Before economic reforms started in 1991, the FDI was discouraged in India from enforcing (a) extreme restrictions on foreign capital holdings and (b) by limiting the FDI to only a few reserved products. The Foreign Exchange Control Act (FERA) of 1973 was substituted by the current law referred to as the Devises Management Act. There was a mistake (FEMA). In contrast to earlier FEMA rules, all international investors were

The phase of economic development in India began with the launch on 1April 1951 of the first five-year plan, although foreign capital was considered to be an important growth component, FDI policy was very selective. Free movement of foreign capital was welcome during the first cinque-year plan, which involved the provision of capital goods and technological skills (1st Five Year Plan, GOI). Foreign policy took a turn in the 3rd and 4th Five Year Plan with extreme foreign exchange reserve restrictions. By the mid-1980s, the country began to expand its economy by attracting international investment and liberalizing its trading regime. In addition to supplying international investors with direct benefits, monetary and fiscal assistance was also given to fulfill such foreign direct investment goals. The establishment of a fiscal system conducive to direct and portfolio investments was a type of such assistance. Progress against foreign direct investment in India in 1948-49 to 1989-90 was very late. India's post-reform economic success has several optimistic characteristics. In the 10-year cycle from 1992-93 to 2001-02, the average growth rate was around 6.0%. In stark contrast, development in the 1990s, amid the East Asian crisis, contributed to unprecedented external stability. There was a mistake (Ahluwalia Montek S.2002). Table 1 presents the annual inflow of foreign investment into India. It demonstrates the FDI's comparative role and the investment portfolio in India. In 2001-02, which contributed to US$6130 million and US $ 2021 million.

economic crisis in the world as well as in India. From the maximum level of 21000, BSE Sensex decreased sharply and registered below 10,000. This culminated in fund investment outflows, amounting to US$ -14032 million in 2008-09. During 1999-00 to 2014-15, development in the FDI inflows and investment in portfolios displayed nearly equal patterns. Higher patterns have been observed before 2007-During 2008/09, the rapid fall in portfolio investment was the product of the financial collapse. Portfolio inflows were – US$ 14032 million but net FDI inflows contributed to US$ 22343 million. In 2008-09, the Total FDI inflows amounted to US$ 8,311 million. For 2014-15, preliminary statistics suggest FDI inflows of 32628 million US dollars and portfolio expenditure of 40934 million US dollars. The patterns in FDI are viewed in the following way as a growth model. According to the FDI inflow data in India from 1999-00 to 2014-15 (Table 1), the value is calculated in the model. The value of r (growth rate) is therefore equivalent to 44.39%. This results in a constant proportional or relative shift in the overall FDI inflow at r (growth rate) for a given absolute change in time.

We find no serial correlation, no heteroscedasticity, normally distributed residual and no auto

As value addition in FDI rises, the beneficial effect of FDI is expected to be greater. In 2008-09, the FDI influx and hence the development of the economy experienced a downturn as a consequence of the global slowdown, however the Indian economy saw a rapid rebound in 2009-10. The global economic crisis has impacted India's economy and GDP development in 2008-09 was modest to 6.8%, compared to an average of 9.5% during the last three years. The effect of the global slowdown on industry particularly the manufacturing sector, was amplified. However, fiscal and monetary policy actions boosted the economy, which contributed to the GDP growth rebound to 8,0% for 2009-10 and 8,9% for the first half of 2010-11 (Economic Survey, 2010-11). In general, FDI inflows have a positive effect on India's GDP growth. Table 2 indicates that, in spite of certain extreme variations, FDI inflows rose from 1999-00 to 2013-14. During the same era, GDP has risen by around three times. The association between GDP development and FDI influx is quantitatively shown by an econometric model.

the value of R2 and R2 almost the same, the model is fitted.

As India achieves its desired targets, as set out in the 12th Five-Year Plan, our economy needs to be solid, dynamic and the outcome of growth equally shared. The effects of the economic reforms of the second century can only be understood if sufficient improvements to administrative apparatus and institutions, both central and federal, were introduced to encourage FDI influx. India's economic reforms also helped crack the Hindu growth trend of 3.5 per cent and step towards higher economic growth. Rising FDI inflow has been one of the key successes of the post-reform era, but its advantages have not extended uniformly throughout the entire economy and are high. The FDI inflow pattern as predicted by the semi-log linear model suggests a gradual rise in FDI inflows in the years to come. If used wisely and with help of infrastructural development, this inflow may contribute to rapid economic growth in the region. Thus, while attracting FDI may be a significant factor for growth, it can be inferred that this is not a goal in itself. The best policy will be to build a country-wide climate for equal FDI inflows and at the same time establish effective internal macro-economic and structural policies.

Ahluwalia, Montek S. (2002), ―Economic Reforms in India since 1991: Has Gradualism Worked?‖ American Economic Association journal, Vol16. De Mello, L.R. and M. Thea Sinclair (1995), ―Foreign Direct Investment, Joint ventures and Endogenous Growth‖, Department of Economics, University of Kent, UK. Economic Survey Government of India, (2010-11), pp.7-8. Economic Survey Government of India, (2014-15). Government of India (1954). First Five year plan (1951-52 & 1955-56), Planning Commission, New Delhi, pp. 437-38. RBI Bulletin 2015.

Research Scholar, J.S. University, Shikohabad