A study of drivers, impact, and pattern of foreign direct investment in India

Till 1991, there was excessive control of Government over economy with inward looking policies leading to over protection of economy leading todeterioration of trade, economic growth and large fiscal deficits financed by external borrowings. Foreign currency reserves plummeted to very low levels. Since then India has seen a steady set of reforms in LPG mode with foreign investment playing important role. In this study datahas been obtained from secondary sources, mainly government and global bodies. Literature cited has been taken with reference to India or generic in nature and problems identified. Policies needed for attracting FDI are not very different from those required for domestic investors. Preferential for FDI may act as an extra incentive. Foreign Portfolio investment is contingent upon returns expected from capital market and home country issues. Foreign direct investment has slowly moved from manufacturing to service sector probably because of easy entry and exit conditions as well as leveraging labour arbitrage. In this study we have reviewed papers on determinants, patterns and impact of FDI and FII/FPI on Indian economy for the period 1991-2012 and attempted to find out interrelation between FDI and FII/FPIinflows.