Foreign direct investment in India : issues involved

With declining Official Development Assistance (ODA) over the last two decades or so, the author argues that now developing countries will be fighting over a smaller cake. Thus the demand for Foreign Direct Investment (FDI) is likely to be highly competitive. Hence it is necessary to view the FDI policies of India's neighbours from this point of view. The first three chapters, consequently, are devoted to the theories of FDI and the policies of China, Malaysia, Thailand and Singapore. The evolution of India's policy over the last four decades indicates that while these countries have maintained continuity of policy, the Indian policy is noteworthy for its discontinuity particularly before 1991.

The author also conducts a comparison of domestic and foreign firms in India using recent balance sheet data. The analysis indicates that foreign firms are less capital intensive, less import intensive and have higher effective tax rates than their domestic counterparts. The study also reveals very little difference in profitability and indicates that export propensities have been low for both sets of firms. It is then argued that the over emphasis on export oriented FDI may be ill advised and counter productive.