Foreign Investment in India

Abstract

Foreign Investment is considered as an instrument of international economic integration as it brings a package of assets including capital, technology, managerial skills and capacity and access to foreign markets. The early works of FDI theory can be traced in the work by MacDougall (1958) who established his model based on the assumptions of perfectly competitive market. One of the most striking developments during the last two decades is the spectacular growth of FDI in the global economic landscape. Since the beginning of economic reforms in 1991, major reform initiatives have been taken up in the field of investment, trade and financial sector. India is considered as a preferred destination for foreign investment. A substantial portion of foreign direct investment (FDI) has taken place in the form of cross border mergers and acquisitions (M&A)). FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. India's structural changes have been realized through FDI. Multiplicity of approvals, administrative procedures, labour regulations, legal system, etc. act as hindrances to doing business in India.