Foreign Direct Investment (FDI)

 

Satyam S. Ratnam

Research Assistant, Directorate of Economics and Statistics, Gandhinagar, Gujarat State.

 

ABSTRACT:

The Economic reforms in India refers to the Neo-Liberal polices introduced by the government in 1991 and in the later years. The central point of the reforms was liberalization of the economy, simplifying regulations, giving more role to the private sector and opening up of the economy to foreign competition started a new era in India’s economic policy with permission to FDI up to 51 percent in selected sectors. The Foreign Direct Investment is constantly decreasing in our country shown during this study. Gujarat has attracted more FDI than what its GDP size alone would suggest but relative to its peer states (especially Tamilnadu, Delhi etc.) it has fallen short significantly. During April 2000 to March 2019, Maharashtra is the highest contributor to achieve the FDI followed by Delhi at second position, Karnataka at 3^rd position, Tamilnadu at 4^th position, Gujarat at 5^th and Andhrapradesh at 6^th position. It is observed that, during the year 2016-17 to 2018-19, there has been a massive decline in FDI of 45% in Gujarat State. There may be many factors responsible for the decline in FDI in the State such as Industrial vulnerabilities in the state, Complexity and uncertainty in FDI policy etc. It is necessary to attract more and more FDI in order to establish the Gujarat state as a “Model State”.

 

 

 

INTRODUCTION:

The economic reforms were started in 1991, and they are still continuing. A major feature of economic reforms was that it was implemented in a gradual manner. The reforms were comprehensive and extensive as it covered all sectors- trade, investment, industrial sector, financial sector, public sector, fiscal sector etc. The new industrial policy introduced in 1991 is the central point of the economic reforms. In the following years, the government has introduced further policy changes for trade liberalization, financial sector liberalization and foreign investment policy changes to sustain the momentum initiated in 1991. Gujarat has attracted more foreign direct investment (FDI) than what its GDP size alone would suggest.

 

But relative to its peer states (especially Tamilnadu, Delhi, Maharashtra and Karnataka, and possibly Andhra Pradesh) it has fallen short significantly. After so many years of New Economic Reforms, let’s observe its impact on Foreign Direct Investment (FDI) in our country as well as different states including Gujarat.

 

OBJECTIVES:

1.     To know the total FDI in India during particular period of years. 

2.     To know the top 6 states regarding flow of FDI.

3.     To know the status of Gujarat among various states to attract the FDI.

 

Period of Study:

It has been taken the Data of Total FDI for the period of April 2000 to March 2019 and also taken the data separately for the year 2016-17 to 2018-19 in this study.

 

Data Collection:

The study is a based mainly on secondary data which is collected from the httpsdipp.gov.in, RBI Bulletin, https://ideas.repec.org, www.indianeconomy.net

 

DATA ANALYSIS:

Foreign Direct Investment (FDI):

(F.D.I. in Rs. Crores)

Sr. No.	States	Year 2016-17 (April to March)	Year 2017-18 (April to March)	Year 2018-19 (April to March)	Total F.D.I. during the period April 2000 to March 2019	Percentage of share of Total F.D.I. during the period April 2000 to March 2019
1	Maharashtra	131,980	86,244	80,013	713,990	30%
2	Delhi	39,482	49,366	70,485	484,219	20%
3	Karnataka	14,300	55,334	46,963	225,510	9%
4	Tamilnadu	14,830	22,354	18,164	173,896	7%
5	Gujarat	22,610	13,457	12,618	117,149	5%
6	Andhrapradesh	14,767	8,037	23,882	106,242	4%
-	Other States /UTs	-	-	-	-	25%
	India	2,91,696#	2,88,889#	3,09,867#	2,378,887	100%

Source: httpsdipp.gov.inpublicationsfdi-statistics__FDI_Factsheet

# Figures for the years 2016-17 to 2018-19 are provisional subject to reconciliation with RBI.

 

According to the above captioned table, it is clear that, the Foreign Direct Investment is constantly decreasing in our country. Even in that Gujarat is lagging too behind in attracting FDI. The FDI in the year 2016-17 in Gujarat was Rs.22, 610/- crores which declined to Rs.13, 457/- crores and Rs.12, 618 crores in the year 2017-18 and 2018-19 respectively. If we observe the time period during April 2000 to March 2019, the F.D.I. is Rs.1, 17,149/- crores in Gujarat which is 5% of the total FDI.

 

During April 2000 to March 2019 the top 6 States which achieved the F.D.I. in our country can be easily understood by the Pie-chart given below.

 

 

While looking at the Pie-chart it is very clear that, during April 2000 to March 2019, Maharashtra (30%) is the highest contributor to achieve the FDI followed by Delhi (20%) at second position, Karnataka (9%), at 3^rd position and Tamilnadu (7%) at 4^th position. However, Gujarat is one step ahead of Andhrapradesh in this regard.

 

There may be many reasons responsible for the constant decreased the FDI among all states including Gujarat. However, looking the world at a glance, the flow of FDI across all countries in the world is reducing. In India in year 2016-17 the total FDI was Rs.2,91,696/- crores which reduced to Rs.2,88,889/- crores in year 2017-18 which increased a bit in year 2018-19 to Rs.3,09,869/- crores. Out of which Rs.63.90/- crores in Service Sector, Rs.45.29/- crores in Computer hardware and software, Rs.18.33/- crores in Telecommunications, Rs.15.03/- corres in Construction Development and Rs.30.96/- crores in Trading in FDI flow in our country has been made. According to the Bulletin of Reserve Bank of India published on date: June 11, 2019, The FDI flow shown US $ 2,738/- Million in April, 2019 in India.   

 

CONCLUSION:

It is observed that, During April 2016-17 to March 2018-19, there has been a massive decline in FDI of 45% in Gujarat State. There may be many factors responsible for the decline in FDI in the State such as Industrial vulnerabilities in the state, Complexity and uncertainty in FDI policy, decline in domestic investment within the state, lack of faith of foreign Institutions/Investors on our economy. Circumstances recession in various sectors of state economy, Uncertainty of share market etc.

 

It is necessary to attract more and more FDI in order to establish the Gujarat state as a “Model State”. In this regard, the government should lighten the rules of FDI, create the circumstances of faith in order to attract the international institutions/investors, to get the good rank of Gujarat domestic investment should be increased within the state.

 

However, seeing at scenario of Gujarat, The various companies from Japana, China and Briton have been reached to finalization of investment to produce the Motor car in our state. Hence, it is possible that, the FDI flow may be increased in the state soon.

 

REFERENCES:

1.      Source: httpsdipp.gov.inpublicationsfdi-statistics__FDI_Factsheet

2.      RBI Bulletin Dated:11 June, 2019.

3.      https://www.indianeconomy.net/splclassroom/what-is-new-economy-reforms/

4.      https://ideas.repec.org/p/iim/iimawp/wp01869.html

 

 

 

Received on 25.08.2019         Modified on 30.08.2019

Accepted on 06.09.2019      ©A&V Publications All right reserved