PROJECT REPORT

ON

FDI INFLOWS AND ITS IMPACT IN INDIA

BY
Arif Ismail
14rwcmd027

Fdi inflows and its impact in India

Foreign Direct Investment (FDI) broadly encompasses any long-term investments by an
entity that is not a resident of the host country. Typically, the investment is over a long
duration of time and the idea is to make an initial investment and then subsequently keep
investing to leverage the host countrys advantages which could be in the form of access to
better (and cheaper) resources, access to a consumer market or access to talent specific to the
host country - which results in the enhancement of efficiency. This long-term relationship
benefits both the investor as well as the host country. The investor benefits in getting higher
returns for his investment than he would have gotten for the same investment in his country
and the host country can benefit by the increased know how or technology transfer to its
workers, increased pressure on its domestic industry to compete with the foreign entity thus
making the industry improve as a whole or by having a demonstration effect on other entities
thinking about investing in the host country

Need for the Study

Foreign direct investment (FDI) has played an important role in the process of globalisation
during the past two decades. The rapid expansion in FDI by multinational enterprises since
the mid-eighties may be attributed to significant changes in technologies, greater
liberalisation of trade and investment regimes, and deregulation and privatisation of markets
in developing countries like India.
The title of the empirical study is FDI inflows and its impact in India during 2007 to 2015.
The present study aims at providing detailed information about FDI inflows in India during
the subsequent years. The analysis is fully based on secondary data collected through
different website and journals.
The project aims at providing information of present FDI policy, year wise FDI inflows,
sector wise FDI inflows, countries contribution to maximum of FDI inflows, state wise FDI
inflows, trends and patterns of FDI inflows in different sector, FDI comparison between India
and China and so on.
From the study it has been found out that total FDI inflows are estimated at US$19.43 billion
during April 2012 to March 2015 and cumulative FDI inflows from 1991-2015 was $146319

million. The services sector, computer hardware & software, telecommunications, real estate,
construction received maximum FDI inflows in India and Mauritius is the main source
followed by Singapore, the US, the UK, the Netherlands and Japan for FDI inflows in India.
From the hypothesis it has been found out that there is a positive relationship between FDI
and economy growth of India. And thus different suggestion and recommendation are given
to improve the present condition of FDI in India.

Statement of the problem

There are many factors that influence the economic condition. One of them is FDI. Hence
there is a need to study the impact of FDI on the change in economy.

Objectives

The study covers the following objective

To study the trends and patterns of flow of FDI.

To evaluate the impact of FDI on the economy.

To study and analyse the Foreign Direct Investment inflows in Service

Sector.

Methodology and Data collection

Data Collection
This study is based on secondary data. The required data have been collected from various
sources, i.e., World Investment Reports, Asian Development Banks Reports, various
Bulletins of Reserve Bank of India, publications from Ministry of Commerce, Govt. of India,
Economic and Social Survey of Asia and the Pacific, United Nations, Asian Development
Outlook, Country Reports on Economic Policy and Trade Practice Bureau of Economic and
Business Affairs, US Department of State and from websites of World Bank, IMF, WTO,
RBI, UNCTAD, EXIM Bank, etc. It is a time series data and the relevant data have been
collected for the period 2010 to 2015.

AIM: To establish the relationship between FDI and growing trends in the Indian economy.

PRIMARY SOURCE: Not Applicable in this research

SECONDARY SOURCE:
The present study is of analytical nature and makes use of secondary data. The relevant
secondary data has been collected from reports of the Ministry of Commerce and Industry,
Government of India, Centre for Monitoring Indian Economy, Reserve Bank of India, World
Investment Report. It is a time series data and the relevant data has been collected for the
period 2007-2015.

Tools for Collecting Data

This study is based on secondary data. The required data have been collected from various
sources i.e. World Investment Reports, Asian Development Banks Reports, various Bulletins
of Reserve Bank of India, publications from Ministry of Commerce, Govt. of India,
Economic and Social Survey of Asia and the Pacific, United Nations, Asian Development
Outlook, Country Reports on Economic Policy and Trade Practice- Bureau of Economic and
Business Affairs, U.S. Department of State and from websites of World Bank, IMF, WTO,
RBI, UNCTAD, EXIM Bank etc.

ANALYTICAL TOOLS

MODEL BUILDING

Plan of Analysis
It is apparent from the above discussion that FDI is a predominant and vital factor in
influencing the contemporary process of global economic development. The study attempts to
analyse the important dimensions of FDI in India. The study works out the trends and
patterns, main determinants and investment flows to India. The study also examines the role
of FDI on economic growth in India for the period 1991-2015. The period under study is
important for a variety of reasons. First of all, it was during July 1991 India opened its doors
to private sector and liberalized its economy. Secondly, the experiences of South-East Asian
countries by liberalizing their economies in 1980s became stars of economic growth and
development in early 1990s. Thirdly, Indias experience with its first generation economic
reforms and the countrys economic growth performance were considered safe havens for

FDI which led to second generation of economic reforms in India in first decade of this
century. Fourthly, there is a considerable change in the attitude of both the developing and
developed countries towards FDI. They both consider FDI as the most suitable form of
external finance. Fifthly, increase in competition for FDI inflows particularly among the
developing nations. The shift of the power centre from the western countries to the Asia sub
continent is yet another reason to take up this study. FDI incentives, removal of restrictions,
bilateral and regional investment agreements among the Asian countries and emergence of
Asia as an economic powerhouse (with China and India emerging as the two most promising
economies of the world) develops new economics in the world of industrialised nations. The
study is important from the view point of the macroeconomic variables included in the study
as no other study has included the explanatory variables which are included in this study. The
study is appropriate in understanding inflows during 1991- 20015.