1. INTRODUCTION:

Foreign Direct Investment (FDI) plays a crucial role in the development process of an economy. FDI has the potential for accelerating development by transfer of long-run financial capital, managerial and technical skill, research and development(R&D), and better innovative ideas. Developing countries like India needs sufficient foreign capital inflow for optimum utilization of natural and human resources and accelerating economic growth. Foreign Direct Investment (FDI), can act as catalysts for the domestic industrial development process. Foreign Direct Investment (FDI), is the investment made by foreign investors entity through capital instruments

1. In an unlisted Indian company or

2. In a listed (stock exchange) Indian company with more than 10 percent of the post, issue paid-up equity capital.

In India, there was ambiguity regarding the identification of Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). It was also not matched with international practice. To solve this ambiguity Finance Minister of India, in his Budget Speech (2013-14), proposed to follow the international practice and clarify that “where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI. A committee headed by Dr. Arvind Mayaram was set up to further clarify this proposition.

Foreign Direct Investment (FDI), Is associated with the attribute of technological know-how, marketing strategy, managerial skill, etc.RBI passed Foreign Exchange Management Regulation in 2017 and identify FDI differently. The revised regulations describe FDI as an “investment through capital instruments by a person resident outside India in an unlisted Indian Company, or 10 % or more than 10 % of the post issue paid-up equity of listed Indian enterprises. These standards are based on the recommendations of the Arvind Maya ram Committee. Here it is very clear that the 10% criterion applies to only listed companies. In any situation, the criteria do not take into consideration the character of foreign investors. Another, with listed companies being far too few compared to the universe of companies in India, in this condition 10 % criteria mentioned by RBI will irrelevant. Additionally, there is a general ceiling of 10 % on individual foreign investors in a listed company, the probability of such investment getting classified as FDI is quite small.

There are three main components of FDI inflow in India

1. Equity Capital refers to the purchase of shares in a host country by the foreign investors

2. Earning or profit (Reinvestment earnings) retained by the already existing foreign companies in the host country. It is neither given out as a dividend nor remitted to the home country; and

3. Intracompany debt transaction; it refers to short-run or long-run borrowing and lending of funds between foreign investors and affiliated enterprises.

Historically, India had followed an extremely cautious and selective approach towards foreign investment. A Major policy shift occurred when India starts an economic reforms program in 1991 aiming to raise its growth potential and integration with the rest of the world economy. Industrial policy reforms gradually removed several restrictions on foreign direct investment and provide a better environment for business expansion. A series of reforms were taken towards liberalizing foreign investment included:

1. Introducing of dual-route approval system of foreign direct investment-RBIs automatic route and Government’s approval through FIBP route.

2. Automatic permission was approved in higher priority industries and removed several restrictions on FDI in the low technology field as well well simplifying technological imports.

3. Granting permission to Non-resident Indians (NRIs)and Overseas Corporate Bodies (OCBs) to invest up to 100 % in high priorities areas.

4. Increase in the foreign equity participation limits to 51 %for existing enterprise and liberalization of the use of the foreign brand name.

5. To protect foreign investors' interests India sign the convention of the Multilateral Investment Guarantee Agency (MIGA).

The integration of the global world economy after the 1990s has led to unprecedented growth of foreign capital and investment. FDI inflows are generally associated with Multinational corporations' (MNCs) operations and production activities across the world. Most of the developing countries have started welcoming FDI in their territories. India has also opened its economy to Foreign Investment by introducing macroeconomic stabilization reform in 1991 and as a result, has become the fifth largest (based on PPP) and fastest-growing world economy with nominal GDP of USD 2.94 trillion in 2019.

2. REVIEW OF LITERATURE:

A literature review is an overview of the previous project on a specific topic. the literature review provides the researcher or author with a general image and conceptual overview of existing knowledge. The literature review provides current knowledge including substantial findings as well as theoretical contribution to a particular topic. At the starting stage of our study related to involved variables i.e., trends and patterns of FDI so that proper guidelines and directions from objectives of study, methodologies, and findings may be sought to assist the various steps.

Nagraj R. (2003) in his paper ‘Foreign Direct Investment in India in the 1990s: Trends and Issues discussed the trends and patterns of Foreign Direct Investment in India in the 1990s and compared it with China’s Foreign Direct Investment inflow. It is suggested that India's Foreign Direct Investment regime may be more liberal than the Chinese regime. Based on comparative study and analysis, the research work concludes that a realistic Foreign Investment Policy is much more needed for a growing economy like India. The research paper also raised important issues regarding the effect of Foreign Investment on the domestic economy.

Nayak D.N. (2006) in his research paper “Canadian Foreign Direct Investment in India: Some Observations”, analyzed the trends and patterns of Foreign Direct Investment inflows in the Indian economy. This article focuses on Canadian economic investment in India. The article finds out that there is very low investment in India by Canadian firms because of a lack of information on investment opportunities and the sluggish economic relationship between the two countries. Nayak suggests that there should be regular publishing of documents like a newsletter that represents and focus on opportunities and potential in India and highlights India’s area of specialization and strength.

Vyas A.V. (2015) examined that Foreign Investment in India has a significant and positive role in economic development. Inflows of FDI in the various sector can attain sustainable economic growth and development through providing jobs, enhancing manufacturing enterprises, and generating infrastructure. The study concludes that the service sector in India growing rapidly and attracting a major part of foreign investment.

Thomas Asha E (2016) examined the impact of foreign capital on Indian growth and development. The data was collected for the period of 2000to 2015. In this research, the impact was analyzed by testing the correlation between the country’s GDP and the stock market index. The two major indexes i.e. Sensex and Nifty were considered as representative of the Indian stock market. The research concludes that inflows of FDI in the Indian economy play a dominant role in fluctuating stock market index.

Mishra R. and Palit S. (2020) this important study analyzed that Foreign Investment has both backward and forward linkages in employment generation in India. FDI inflows in India increased rapidly and the service sector is one of the major sectors which attract sufficient foreign investment. The banking and insurance sector has the first position in attracting FDI whereas the Telecommunication sector is followed by the service sector which has a second position in attracting FDI in India.

3. OBJECTIVES OF THE STUDY:

These are the following objectives of the study

1. To study the trends and patterns of FDI Inflows from 2000-01 to 2020-21 as per international norms and practices.

2. To study the main trends and patterns of Foreign Direct Investment from 2001 to 2020-21 as per RBI data.

4. RESEARCH METHODOLOGY:

By research methodology, we can solve research problems systematically. This study is analytical in nature and it analyses the trends of FDI inflows in India with the help of graphs and tables drawn by using MS Excel. In the study, we have used secondary data for analyzing the trends of FDI inflows in India. Required secondary data has been collected from various sources which include reports and publications basically from the Department of Industrial Policy and Promotion, Government of India, Ministry of commerce and industry, and Reserve Bank of India.

Trends and Pattern of FDI inflow In India:

The share of India in the global FDI has been increasing rapidly since 1991. FDI has increased from 0.09 percent in 1991 to 3.89 percent in 2018(World Bank report). According to World Investment Report 2020 by United Nations Conference on Trade and Development (UNCTAD), India is one of the favorite destinations of FDI. India is among the top ten countries in the world in respect of attracting FDI, it receives USD 49 billion FDI inflow in2019. The Kearney FDI Confidence Index of India is 1.54 in 2019 and has attained 17^th rank in the world. India can attract FDI inflow due to several positive reasons like the large market size, a sound and efficient economic policy, and a transparent environment for foreign investors. With the adaptations of New Economic policy by India since the 1990s, there was a consistent increase in FDI inflows.

Table: Financial Year-Wise Fdi Equity Inflows

S. No.	*Financial Year (April – March)*	*Amount of FDI Equity Inflows*		*% Age growth over previous year (in terms of US $)*
Financial Years 2000-01 TO 2021-22		*In Rs Crores*	*In US$ Million*	*% Age growth over previous year (in terms of US $)*
1.	2000-01	10,733	2,463	-
2.	2001-02	18,654	4,065	( + )65 %
3.	2002-03	12,871	2,705	( - )33 %
4.	2003-04	10,064	2,188	( - )19 %
5.	2004-05	14,653	3,219	( + )47 %
6.	2005-06	24,584	5,540	( + )72 %
7.	2006-07	56,390	12,492	(+ )125 %
8.	2007-08	98,642	24,575	( + )97 %
9.	2008-09	1,42,829	31,396	( + )28 %
10.	2009-10	1,23,120	25,834	( - )18 %
11.	2010-11	97,320	21,383	( - )17 %
12.	2011-12 ^	1,65,146	35,121	(+)64 %
13.	2012-13	1,21,907	22,423	(-)36 %
14.	2013-14	1,47,518	24,299	(+)8%
15.	2014-15	1,81,682	29,737	(+)22%
16.	2015-16	2,62,322	40,001	(+)35%
17.	2016-17	2,91,696	43,478	(+)9%
18.	2017-18	2,88,889	44,857	(+)3%
19.	2018-19	3,09,867	44,366	(-)1%
20.	2019–20	3,53,558	49,977	(+)13%
21.	2020-21	4,42,569	59,636	(+)19%
22.	2021-22 (up to June, 2021)	1,29,320	17,567	-
Cumulative Total (from April, 2000 to June, 2021)		33,04,334	547,322

DPIIT’s – Financial Year-Wise Fdi Equity Inflows:

(As per DPIIT’s FDI data base – equity capital components only):

Note: (i) including amount remitted through RBI’s-NRI Schemes (2000-2002).

(ii) FEDAI (Foreign Exchange Dealers Association of India) conversion rate from rupees to US dollar applied, on the basis of the monthly average rate provided by RBI (DEPR), Mumbai

CONCLUSION:

This is an analysis of twenty years of trends of foreign direct inflows in India. The study shows that the FDI inflows and net FDI inflows remained more or less stagnant during the period 2000-01 to 2005-06. However, a steady rise in the FDI inflows in India was seen after this period which came after the sub-prime lending crisis. This rise in FDI inflows can be explained on many grounds. Firstly, the fundamentals of Indian economy were strong enough to build confidence in foreign capital of better returns. Secondly, a comparatively higher rate of interest also attracted the foreign investors. Again, after the year 2009-10 we see a fall in the net FDI inflows in India which was followed by a steady rise in the FDI inflows in India after 2013-14.

REFERENCES:

1. Mishra, R., & Palit, S. (2020). Role of FDI on employment scenario in India. International Journal of Recent Technology and Engineering (IJRTE), 8(6), 1481-1489.

2. Nagaraj, R. (2003). Foreign direct investment in India in the 1990s: trends and issues. Economic and political weekly, 1701-1712.

3. Nayak, D. N. (1999). Canadian foreign direct investment in India: Some observations. Political economy journal of India, 8(1), 51-56.

4. Rao, K. S., & Dhar, B. (2011). India’s FDI inflows: Trends and concepts. Available at SSRN 1770222.

5. Singh, S. (2019). Foreign direct investment (FDI) inflows in India. Journal of General Management Research, 6(1), 41-53.

6. Thomas, A. E. (2016). Impact of FDI on Indian Economy–An Analytical Study. Thomas Asha E. (2016). Impact of FDI on Indian Economy–An Analytical Study. International Journal of Business and Administration Research Review, 1(4), 91-94.

7. Vyas, A. V. (2015). An analytical study of FDI in India. International Journal of Scientific and Research Publications, 5(10), 1-30.

Received on 22.03.2022 Modified on 11.04.2022

Res. J. Humanities and Social Sciences. 2022;13(2):101-104.

DOI: 10.52711/2321-5828.2022.00017