Page 241 - DMGT401Business Environment

Business Environment

Notes
During the post liberalization period, Mauritius and the USA are the largest sources of FDI
for India. Mauritius being the tax heaven companies route their FDI through Mauritius.
A part from Mauritius and USA, Japan U.K. and Netherland respectively were major
contributors of FDI during 2002-03.
Country in Crore Share in Total Investment
Mauritius 33820.73 40.68
USA 15409.92 18.54
Japan 7430.64 8.94
U.K. 6648.56 7.80
Netherland 5969.43 7.18
Germany 4512.30. 5.43
France 2656.57 3.20
South Korea 2489.66 2.99
Singapore 2348.04 2.82
Switzerland 1842.79 2.22
Total 83128.64 100.00
Source: Economic Survey 2003-04
After liberalization India couldn’t attract much FDI in last decade as compared to its
eastern neighbor. During 2003, FDI inflows to China were $ 53 bn and India only $4bn. But
the actual difference is not so high. As both the countries follow different computation
method for calculating FDI. Dr. Nirupama Bajpai observed (Business Line, 15 May 2004)
that after making the necessary adjustments, FDI inflows, excluding the ‘round tripping’
into China during 1999 and 2000, reduces FDI net inflow from $ 40bn to $20 bn. On the on
the other hand, India’s adoption of a standard method of FDI computation should raise its
net annual FDI inflow figures, as reported I the RBI’s official balance of payment statistics,
to rise from around $3 bn to about $8 bn.
To woo FDI, the government of India has taken various steps and has established various
organization to support FDI as Secretariat For Industrial Assistance (SIA) , Foreign
Investment Promotion Board, (FIPB), Focus Windows, Foreign Investment Promotion
Council (FIPC) etc.

Questions
1. Has India truly arrived at the global platform as a lucrative market?
2. What are changes you notice in recent years in context of localizing India in the
global market?

Source: Vivek Mittal, Business Environment, First Edition, Excel Books, New Delhi, 2007
10.3 Summary

Foreign Direct Investment (FDI) is defined as an investment made by an investor of one
country to acquire an asset in another country with the intent to manage that asset.
Governments of developing nations are attracting FDI along with the technology and
management skills that accompany it. To attract multinational companies, governments
are offering tax holidays, import duty exemption, subsidised land and power and many
other incentives.
Multinational companies are a part of the Indian economy since the British period either
as a wholly owned subsidiary or as a joint venture. They played a critical role in the

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