Exim Bank's latest study titled "FDI Flows and Investment Policies in India and Select Asian Countries: A Comparative Analysis" examines recent trends in FDI inflows and investment policy in India and select Asian countries, and identifies imperatives for enhancing FDI inflows into India. According to the study, FDI contributes to a country's economic growth and development; its adds to fixed capital formation, brings technology, know-how, managerial skills and access to markets, increases the efficiency of local firms and the competitiveness of local markets. In the case of developing countries, potential benefits such as transfer or spillovers of management, skills, know-how, organizational capabilities and technology are of particular importance.
The study observes that although FDI inflows into India have risen in recent years, the stock of FDI inflows for India is lower than that for other select Asian countries. Further, the study observes that the share of FDI stock to the country's GDP is much lower as compared to those in other Asian countries such as Philippines, Thailand, Malaysia, and even Vietnam, indicating that FDI in India is yet to play its desired role in overall economic activity. India is now well recognised as an attractive destination for investment, and a large and growing market for business. India is emerging as a global player in information technology and is in the forefront of the unfolding new area of knowledge economy, with its large pool of scientific and creative human resources and R&D facilities. In light of the strong fundamentals of the Indian economy and its potential thereof, the study stresses the imperative of identifying key issues/concerns with a view to discerning policy parameters to foster increased FDI inflows, while also ensuring that FDI inflows are conducive to sustainable development.
Key issues and concerns would include, according to the study, FDI caps and restrictions, weak / inadequate infrastructure, protection of intellectual property rights, tax administration, customs clearances, among others. These concerns and issues have also been expressed by international organizations / institutions such as the World Bank, AT Kearney, PricewaterhouseCoooers', among others. While the FDI policy in India has continuously been simplified and streamlined leading thereby to a liberal investment environment, the concerns and issues highlighted above would need to be addressed to ensure increased FDI inflows into the country. This, in turn, would assume increased importance in light of the recent low ranking of India among the Asian countries in the World Bank's "Doing Business in 2006".
The study concludes that, while the prospects for FDI inflows are positive both in the short-term and medium-term, countries are expected to intensify their efforts to attract FDI and would compete fiercely for it, with investment targeting becoming an important tool. At the same time, potential investors on their part would become increasingly selective in choosing investment destinations. In light of these, the study stresses that developing countries in particular would need to carefully formulate their policies and investment promotion strategies.
For further information, please contact
Mr. David Sinate,
Deputy General Manager,
Planning & Research Group,
Export-Import Bank of India,
Centre One Building, Floor 21,
World Trade Centre Complex, Cuffe Parade,
Mumbai 400 005.
Telephone: 22185272, extn. 2307;