A STUDY ON IMPACT OF FDI ON SERVICE SECTOR
Presented By:
Ms Pushpa A
Dept of Management studies
Garden City College
Bangalore|
Ms Shymala J.
Dept of Management studies
Garden City College
Bangalore|
|
ABSTRACT
The last two decades have witnessed an unprecedented growth of the Indian service sector. FDI is a tool for economic growth through its strengthening of domestic capital, productivity and employment. FDI plays a vital role in the up gradation of technology, skills and managerial capabilities in various sectors of the economy. The study aims to analyze the growth dynamics of the FDI. It intends to see whether the growth in FDI has any significant impact on the service sector growth and also investigates whether a growth in this
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* Horizontal: When the MNCs kick off similar business operations in different countries it becomes horizontal Foreign Direct Investment. It is actually a cloning that is happening here. Both the countries enjoy the same share of growth.
FDI IN INDIA
After getting independence in 1947, the government of India envisioned a socialist approach based on the USSR system to developing the country’s economy. The last decade of the 20th century witnessed a drastic increase in foreign direct investment (FDI), accompanied by a marked change in the attitude of most developing countries towards inward investment. FDI flows have grown in importance relative to other forms of international capital flows, and the resulting production has increased as a share of world output.. FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development during recession. This money has allowed India to focus on the areas that may have needed economic attention and address various problems that continue to challenge the country. The factors that attracted investment in India are stable economic policies, availability of cheap and quality human resources, and opportunities of new unexplored markets. Mostly FDI are flowing in service sector and manufacturing sector recorded very low investments. The investments in service sector enhanced the benefit of flow of funds to the home country. Presently India is contributing about 17% of
What is the difference between vertical and horizontal FDI? Give one example of an industry or each type. “Vertical FDI is when a company invests internationally to provide input into its core operations – usually in its home country” (Carpenter & Sanjyot, 2013). “Horizontal
India has emerged as a trading superpower and as an increasing magnet for FDI. Its role in the international economy to this point has been less remarked than the rise and dominance of China but increasingly India will be appreciated for the opportunities it is creating for its citizens, employers and foreign and domestic firms.
In many cases, multinational corporations conduct horizontal foreign direct investment (FDI) activities in order to expand their operations into another market. For example, an American retailer that builds a store in China is trying to earn more money by exploring the Chinese market. Vertical FDI, on the other hand, occurs when a multinational decides to acquire or build an operation that either fulfills the role of a supplier (backward vertical FDI) or the role of a distributor (forward vertical FDI).
India represents a complex mix of exotic images and prosaic realities. Exotic images of India encompass elephants and monkeys, curry and naan, bindis and Bollywood. The prosaic realities of India focus on the third-world poverty, the prevalence of outsourcing, and its geo-political location in Asia. However, India has cultivated a thriving, modern business presence, and it is poised to become a global financial juggernaut in the next fifteen years. Over the last two decades, India has experienced marked economic and industrial growth in its own country as well as the global community. The rise of India will have a significant impact, not only on the U.S. economy, but
Tarun Kanti Bose (Corresponding author) Assistant Professor, Business Administration Discipline, Khulna University Khulna 9208, Bangladesh Tel: 880-1911-451-044 Received: February 25, 2012 doi:10.5539/ibr.v5n5p164 Abstract This study was directed towards detecting the positive and negative sides for the foreign investors while they go for direct investment in India and China. A descriptive and explorative research study has been carried out for investigating the current proposition of the concerned case of FDI in those two countries. Advantages of investing in India includes-Huge market size and a
In 2013 the total exports for India was at $313.2 billion whereas the import stood at $467.5 billion (CIA, 2014). India followed the Adam Smith model producing only what it was efficient at and imported the rest. There started a reversal in capital inflows which hit the export demand and posted a crunch in the domestic markets leading to a decline of more than 2% in India’s GDP in the fiscal year 2008-2009 (Kumar & Vashisht, 2009). In 2008 India was already experiencing a high inflation rate, which reduced expenditure in the country. To address the crisis and its affects the Indian government and the banks introduced fiscal stimulus and relaxed monetary policies in order to boost domestic demand. The market interest rates increased to 20% and above suddenly. India had received a fiscal stimulus of $80 billion injected into the economy to ensure liquidity. India was loosing badly on FDI’s and remittances. During 2008, India’s FDI inflows experienced a negative growth of 2% (Kumar & Vashisht, 2009). Remittances also are a major part of the capital inflows of the country, in 2008 the remittance inflow declined by more than 29% (Kumar & Vashisht, 2009) as every country first wanted to protect jobs of its home citizens and there was a severe lay off. Exports to USA is a major component of India’s GDP. After a sharp decline in the demand from the US, India had to lay off more than 300,000 workers instantly. There was a decline in exports of India by
The economy of India is a creating blended economy. It is the world's 6th biggest economy by ostensible Gross domestic product and the third-biggest by obtaining power equality (PPP). The nation positions 141st in per capita Gross domestic product (ostensible) and 123rd in per capita Gross domestic product (PPP). After 1991 financial progression, India accomplished 6-7% normal Gross domestic product development every year. The long-term growth prospective of the Indian economy is positive due to its young population, corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy.
Here it is important to explain some definitions used by Tadesse and Shukralla before continuing. Horizontal diversification is the acquisition or merger of competitors in a same, similar or different business (Hitt, Ireland, & Hoskisson, 2015). Foreign Direct Investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country (Investopedia, 2003).
FDI is freely allowed in most sectors, including the service sector. FDI for virtually all items or activities can be bought in through the Automatic Route under powers delegated to the Reserve Bank of India and for the remaining items or activities through the Government approval. Government approvals are accorded on the recommendation
There is growing consensus among researchers and academicians that in this globalized world the burden of private investment is increasing over Foreign Direct Investment (FDI). Because of a declining trend in public investment the task of capital formation rests over the shoulder of private investment and thus FDI playing a leading role in determining the fate of the economy. The economies receiving more inflow of FDI, are realizing a comparatively high growth and vice-versa. This is also expected to be happen in India. The present paper discusses the relationship between the inflow of FDI and GDP. It has been found that FDI has a positive correlation with GDP. the regression analysis between GDP and FDI of different sectors also supported the same result which shows that FDI inflow in India is playing very important role in determining the size of GDP.
In order to meet the objectives of the study to analyses the Impact of Foreign Direct Investment on Indian Economy, annual data have been collected from 2007-2016. However to make analysis between financial performance of FDI based Companies and Non FDI based Companies listed at BSE for 10 years has been considered. This study is based on secondary data. The required data have been collected from CMIE Prowess IQ data base.The tools used in the study are panel data Fixed Effect Model, Random Effect Model, Hausman test and Chow test. The sample size is selected on the basis of FDI definition given by IMF i.e. if foreign shareholding is 10% or more than 10% in the company that company will be considered as FDI based
A foreign direct investment has become a striking measure of economic development in both developed and developing countries. FDI and FII thus have become instruments of international economic integration and incentive. Fast growing economies like China, Singapore etc., have registered unbelievable growth at onset of FDI. Though US captures most of the FDI inflows, developing countries still account for significant growth of FDI and rise in FII. FDI not only gives access to foreign capital but also provides domestic countries with cutting edge technology, desired skill sets, tools of innovation and other harmonious skills. The policies drafted to stimulate the flow of foreign capital in to India provided much needed an external (or) internal for India to emerge as an attractive destination for foreign investors. External factors such as global economic cues, FDI & FII, Exchange rate and Internal factors such as demand and supply, market cap, EPS generally drive and dictates the Indian stock market. The current paper makes an attempt to study the relationship and impact of FDI & FII on Indian stock market using statistical measures namely correlation coefficient and multi regression during the study period from 2005 to 2014. Sensex and Nifty were considered as the representative of stock market as they are the most popular Indian stock market indices. It concludes that Flow of FDIs and FIIs in India determines the trend of Indian stock market during the study
Present paper utilizes the annual data of GDP, Indian FDI, level of Investment and Export in real terms from the period 1989/90 to 2013/14. The concerned variables are transformed into logarithm and hereafter these are denoted by 〖LnGDP〗_t,〖LnFDI〗_t 〖LnI〗_t and 〖LnX〗_t .
The Indian economy had left behind the low-growth track of the early 1980s, following the bold economic reforms initiated in 1991-93. India began to appear as a significant player in the global economy. India’s exports began to climb, its foreign exchange reserves, which for decades had hovered around 5 billion dollars, rose exponentially after the economic reforms and in little more than a decade had risen to 300 billion dollars. Indian corporations that rarely ventured out of India
The present study is descriptive in nature based on secondary data collected through newspapers, magazines, research papers and various publications of government, to analyze the issues and prospects of FDI in one of the most significant sectors of Indian economy.