India became a prosperous nation during 1700s and articulated its economic statusin the major areas of food and crop production, textiles, glass etc increasingper capita income to a satisfactory level. However, the year 1757 came with theBritish rule and has the control in developing and formulating new businesspolicies causing troubles for local farmers and craftsmen. The policy was morein terms of imports rather than exports and huge amount of money was forwardedto different regions specifically Britain.


It's only after Indian Independence when various measureswere taken and Indian become founding member of various trade blocs thecommission was set up in India to plane further course of action.


We should not forget the 15th century when thefirst European colonists had started visiting the shores of India. In the early 16th century, Portuguese rule was established on the Westcoast of India at Goa; however, the Portuguese did not succeed in moving deepinto the country. It was the British who began with the battle of Plassey in1757and moved forward. Then came many changes in the history and lot ofdevelopment also took place, one of the example was the setting up of Indianrailways. Year 1920 has made India withstand the fourth largest railway networkin the world and with the history of 60 years of construction. The system bythe end of year 1900 provided India with social savings of 9% of India's national income.


Needless to mention that all the engineering skills,knowledge, setting up of universities etc were taking place and moving India towards the road of development. Investment in terms of various subjects was comingin and yes exports were also increasing. For instance, due to the shortage ofskilled manpower raw cotton was used to send to Britain and finished goods comeback. Infrastructure development was the priority in the 1900 era. Theseexamples clearly states that even in the beginning of the 19th centuryglobalization were taking place, however, in a less conducive manner.


Current Investment scenario in India: Inward and Outward


Globalization and Foreign Direct Investment (FDI) is playingan important role in the development of developed, developing as well asunderdeveloped economies. The reasons are simple like introduction of newproducts, new skills, easy approachable markets and modern technology to thehost countries. Every country around the world is playing a important role inthe encouragement of foreign and overseas investors and their investments. India is being ranked as the second most favored destination for foreign investments after China by showing a growth year after year.


End of fiscal year 2008-09 Indian received FDI inflowstotaling approximately USD$11.2 billion with Mauritius as the highestcontributor. Sectors like services including financial and non-financialservices attracted the maximum amount of US$6.1 billion. As per the figuresreleased by Department of Industrial Policy and Promotion (FDI) inflows during2008-09 (from April 2008 to March 2009) stood at approx. US$ 27.3 billion andinflows for the last quarter alone of 2008-09 stood at approx. US$ 6.2 billion.Government on time to time has taken various initiatives to liberalize FDIpolicies so as to receive maximum investment keeping in mind that domesticproducts should not get blemished. The FDI outflow from India has also been increased and expected to reach to very high mark.


As per the figures released by Reserve Bank of India thetotal outward investment from India, excluding that were made by individualsand banks, rose 29.6 per cent to US$17.4 billion in 2007-08. The second highestforeign employer in the UK is India after the US, according to the 2009 UK inward foreign direct investment (FDI) official data. With various mergers andacquisitions Indian businessmen are expanding their horizons and creating amark in the International arena. Companies like Apollo Tyres, EvereadyIndustries etc are among some of the companies which are investing abroad.Indian banks, financial institutions are amongst them also to invest abroad.Government as in terms of increasing FDI inflow has taken various initiativesfor outflow as well. Like raising the overall limit for overseas investment bydomestic mutual funds from US$5 billion to US$7 billion, increasing the limitof remittance and allowing mutual funds to make an aggregate investment etc.

 

Opportunities and Threats of Foreign Direct Investment


A paper published by David Woodward for G-24 clearly states that FDI flows to developing countries have grown strongly in recent years. It has mentioned that total flows in 2006 were nearly double their 2001 level, and are estimated to have increased by a further 20% in 2007. The paper stated that flows to West Asia have increased by 700%, those to Latin America remain marginally above the 2001 level. Extractive sectors predominate in Sub-Saharan Africa (SSA), and services in West Asia, while knowledge-intensive sectors have become more important in East Asia.


However it's true that FDI do offer various opportunities and helps a country to prosper by means of providing job opportunities, infrastructure development and certain other benefits, but in long-term balance-of-payments effects if outflows for profit remittances and imports prevail over the initial capital inflow and additional export revenues. The dependence of especially developing countries increases so much on FDI that they are busy in formulating new policies to attract investment, but one should not forget that there are countries who have planed their policies in a way that once they were biggest importers of the same products which now a days they are biggest sellers/ exporters.


The views mentioned are personal.