Page 304 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy

Notes Points of Concern to Foreign Investors : Main concerns of foreign investors regarding the new
policy are given below.
1. Comparative Advantage among Different investment Markets : There are three basic
advantages in India :
(i) Cheap manpower.
(ii) Large domestic market.
(iii) Inputs with easy availability and lower costs. However, it is argued that low wage levels
may be offset by productivity level to a large extent. For taking hard investment decisions,
consumption patterns are more relevant than classifications based on incomes and in this
regard, India may not score very high in foreigners’ projections. Moreover, the numbers
of industries where India can offer such input advantages are few.
2. Permanence of New Policy : India must assure the foreign investors of the liberalisation policy
in the future also.
3. Exit Policy : Disinvestment requires approvals which are both cumbersome and time-consuming
and are virtually dictated by the RBI. This makes potential foreign investors more cautious in
considering investment proposals.
4. Procedural Simplifications : The procedures should be simplified.
5. Removal of Comparative Disadvantages : India must convince that the existing comparative
advantages are not offset by the comparative disadvantages they have to cope with in the country.

Self-Assessment
1. Choose the correct options:
(i) ............... is (are) the sourcing of goods and services from locations world-wide in seeking
advantage of national differences and a form of competitive advantage.
(a) Factors of production (b) Distribution of production
(c) Globalization of production (d) Dominance of production
(ii) Which of the following is the oldest institution to maintain order in the international monetary
system?
(a) United Nations (UN)
(b) International Monetary Fund (IMF)
(c) World Trade Organization (WTO)
(d) General Agreement on Tariffs and Trade (GATT)
(iii) ............... is when a firm invests resources in business activities outside its home country.
(a) Capital intensive investment (b) Overseas selective borrowing
(c) Venture capital development (d) Foreign direct investment
(iv) Which of the following is NOT one of the four major factors that help the U.S. to continue to
hold competitive advantages over other national players for global market share?
(a) the reputation of U.S. graduate schools of business and management
(b) the U.S. dominance in direct foreign investment
(c) the dominance of U.S. multinational corporations on the international business scene
(d) the U.S. dominance in trade and commercial diplomacy which few nations can compete
(v) Which of the following reflects the trends of the global economy in the 21st Century?
(a) Globalization is not inevitable.
(b) The skill, scope and authority of world institutions mean global financial shocks and
challenges to global business systems will be mild and short-lived and will eventually
disappear.

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