Comparative Analysis of FDI in India and Brics Nations Mr.Piyush Shah: Research Scholar, JJT University, Rajasthan Dr

July 2012 Entire Research, Vol.- 4, Issue-III 1 Comparative Analysis of FDI in India and Brics Nations Mr.Piyush Shah: Research scholar, JJT University, Rajasthan Dr. Nishikant Jha: Research scholar, JJT University, Rajasthan Abstract : The research paper tries to bring out the comparative study of flow of FDI in India and its comparison with BRICS nations. It gives the historical back drop of the various trends in FDI of various countries. It further gives the ranking to various country based on the flow of FDI. Findings: China attracted highest FDI, followed by Brazil (stands second), Russia (stands third), India (stands fourth) and South Africa (stands fifth). Introduction: All the countries in the world are continuously striving for rapid economic growth and as a result they are inviting more and more investments by allowing foreign investors to invest in their land. There are several factors that help or hinder the economic growth of a country, and the factors, that are often identified as stimulants (World Investment Report UNCTAD, 1994) for a country‘s growth are: (1) Large amounts of investment capital, (2) Advanced Technologies, (3) Highly skilled labor, (4) Well-developed transportation and communication infrastructure, (5) Stable and supportive political and social institutions, (6) Low tax rates, and (7) Favorable regulatory environment. Differences in the growth rates of the countries are explained by the differences in the endowments or levels of these factors (Dondeti and Mohanty, 2007). Though, FDI is seen as a vital factor in inducing growth rate, however, it will only lead to growth if its inflows are properly managed (Bezuidenhout, 2009). The degree up to which FDI can be exploited for economic development depends on conduciveness of economic climate. In the absence of such a climate FDI may be counterproductive; it may thwart rather than promote growth. In this article the FDI inflows of the BRICS nations are compared which also indicates the economic growth of the BRICS nations. Objectives: 1) To compare the FDI in India with the World as a whole. 2) To compare the FDI in India with China. 3) To compare the FDI in India with Russia 4) To compare the FDI in India with Brazil 5) To compare the FDI in India with South Africa 6) To compare the FDI in India with BRICS Nations and rank them. Comparative Analysis of India V/s. World FDI in India At the time of independence, the attitude towards foreign capital was one of fear and suspicion. This was natural on account of the previous exploitative role played by it in ‗draining away‘ resources from this country. The suspicion and hostility found expression in the Industrial Policy of 1948 which, though recognizing the role of private foreign investment in the country, emphasized that its regulation was necessary in the national interest. Because of this attitude expressed in the 1948 resolution, foreign capitalists got dissatisfied and as a result, the flow of imports of ca[ital goods got obstructed. As a result, the prime minister had to give following assurances to the foreign capitalists in 1949: 1. No discrimination between foreign and Indian capital. The government o India will not differentiate between the foreign and Indian capital. The implication was that the government would not place any restrictions or impose any conditions on foreign enterprise which were not applicable to similar Indian enterprises. ISSN 0975-5020 July 2012 Entire Research, Vol.- 4, Issue-III 2 2. Full opportunities to earn profits. The foreign interests operating in India would be permitted to earn profits without subjecting them to undue controls. Only such restrictions would be imposed which also apply to the Indian enterprises. 3. Guarantee of compensation. If and when foreign enterprises are compulsorily acquired, compensation will be paid on a fair and equitable basis as already announced in government‘s statement of policy. Though the Prime Minister stated that the major interest in ownership and effective control of an undertaking should be in Indian hands, he gave assurance that there would be ―no hard and fast rule in this matter.‖ By a declaration issued on June 2, 1950, the government assured the foreign capitalists that they can remit the he foreign investments made by them in the country after January 1, 1950. In addition, they were also allowed to remit whatever investment of profit and taken place. Despite the above assurances, foreign capital in the requisite quantity did now flow into India during the period of the First plan. The atmosphere of suspicion had not changed substantially. However, the policy statement of the Prime Minister issued in 1949 and continued practically unchanged in the 1956 Industrial Policy Resolution, had opened up immense fields to foreign participation. In addition, the trends towards liberalization grew slowly and gradually more strong and the role of foreign investment grew more and more important. The government relaxed its policy concerning majority ownership in several cases and granted several tax concessions for foreign personnel. Substantial liberalization was announced in the New Industrial Policy declared by the government on 24th July 1991 and doors of several industries have been opened up for foreign investment. From then India‘s inward investment regime went through a series of changes since economic reforms were ushered in two decades back. The expectation of the policy makers was that an ―investor friendly‖ regime will help India establish itself as a preferred destination of foreign investors. These expectations remained largely unfulfilled despite the consistent attempts by the policy makers to increase the attractiveness of India by further changes in policies that included opening up of individual sectors, raising the hitherto existing caps on foreign holding and improving investment procedures. But after 2005‐06, official statistics started reporting steep increases in FDI inflows. The following table shows year-wise inflow of FDI and percentage of the world FDI, inflows in India. Table 1.1 Year-wise Inflow of FDI in India Amount in Million PERCENTAGE OF YEAR INDIA WORLD 1980 451.75 0.0646 1981 543.67 0.0725 1982 615.75 0.0785 1983 621.39 0.0743 1984 640.63 0.0740 1985 746.72 0.0756 ISSN 0975-5020 July 2012 Entire Research, Vol.- 4, Issue-III 3 1986 864.45 0.0761 1987 1076.77 0.0805 1988 1168.02 0.0764 1989 1420.12 0.0772 1990 1656.81 0.0796 1991 1731.81 0.0739 1992 1983.81 0.0818 1993 2515.81 0.0964 1994 3489.81 0.1224 1995 5640.81 0.1663 1996 8165.81 0.2110 1997 10630.10 0.2385 1998 14065.36 0.2541 1999 15426.10 0.2284 2000 16338.95 0.2194 2001 19675.92 0.2635 2002 25826.28 0.3437 2003 32549.19 0.3462 2004 38060.24 0.3431 2005 43201.58 0.3744 2006 70870.28 0.5123 2007 105790.49 0.5927 2008 125211.65 0.8187 2009 167023.18 0.9305 2010 197939.29 1.0341 TOTAL 915942.55 - AVERAGE 29546.53 0.2607 Source: UNCTAD ISSN 0975-5020 July 2012 Entire Research, Vol.- 4, Issue-III 4 The above table shows that the inflow of India is continuously increasing. From the year 1980, the inflow of FDI was increasing continuously at slower rate. As mentioned above, India made new Industrial Policy in the year 1991 and opened up the door for foreign investment. Therefore, the speed of FDI inflow in India was increased. From then the policy maker continuously made favourable changes in the policies of FDI to accelerate it, as a result of this there was a rapid increase in the inflow of FDI in India from the year 2006. FDI Inflows in India During 2005- 2006 has registered significant growth in comparison to the previous year. FDI Inflows in India During 2005- 2006 has increased to such an extent that the country has ranked 4th among all the recipients of foreign direct investment in 2006. In the year 2006, the India attracted 0.5123% of the word FDI. In the year, 2010, the total inflow of FDI was $ 197939.29 million. India attracted 1.0341% of World FDI because of the positive policy of the government for accelerating FDI inflow in India. Within the span of 4 years i.e. from 2006 to 2010, the India attracted the double percentage of world FDI, as it was attracted 0.5123% world FDI in the year 2006 and was able to attract 1.0341% of world FDI in the year 2010. The following charts show the year-wise inflow of FDI and percentage of world FDI. YEAR-WISE FDI INFLOW IN INDIA 250000 200000 150000 100000 50000 0 INDIA Amount in Million in Amount 1998 2002 2006 1980 1982 1984 1986 1988 1990 1992 1994 1996 2000 2004 2008 2010 Years Figure 1: Year-wise Inflow of FDI PERCENTAGE OF WORLD FDI 2 1 0 PERCENTAGE OF WORLD FDI Percentage 1990 1980 1982 1984 1986 1988 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Years Figure 2: Year-wise percentage of World FDI inflow in India Comparative Analysis of India V/s. China FDI in China In late 1970s, China underwent through economic reformation which did pay well when the current situation is analyzed. The most important of the reforms was the opening of foreign trade and investment in China. ISSN 0975-5020 July 2012 Entire Research, Vol.- 4, Issue-III 5 Foreign Direct Investment in China, in 1980s was limited to only joint venture partnerships with the Chinese firms. The policies were basically export oriented. But after 1990, things changed gradually and steadily, as China allowed the foreign investors to manufacture and sell a wide range of goods in the Chinese domestic market.

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