Foreige collaboration under liberalisation policy c.2

In recent years, there has been a resurgence in the investment flows and technology transfer through foreign direct investment (FDI) to the developing world. The data indicate that developing countries today receive twice as much as the value of world FDI flow was in mid-eighties'. Several factors may have influenced in shaping this trend. Among these, liberalisation of FDI policy by the host countries is generally regarded as very important. Prima facie, there is an association between the liberalisation of policy frameworks and the recent FDI boom in developing countries. Today, the transnational corporations (TNCs) and other investors are more attracted to deploy their tangible and intangible assets in the developing countries with a view to increase their competitiveness and profitability, and the developing countries consider the increased FDI inflow as necessary for strengthening their resource-base and macro-economic stability, and improving their overall economic performance. It seems, therefore, useful to study current patterns and determinants of FDI in order to understand the dynamic role of foreign direct investment under liberalisation policy in a developing country. The present study is an attempt in this direction by taking India as a country case. To elaborate, some significant developments in the recent decades have created a new setting for FDI inflows and technology transfer into developing countries. For example, the development of new and emerging technologies (e.g. micro-electronics, informatics, and genetic engineering) has revolutionised the structure and organisation of production and trade in a manner requiring increased international integration and heightened role of the TNCs. Similarly, in the unipolar world of today, the flow of commercial loans and foreign aid to developing countries is declining which has raised the relative importance of TNCs as a source of investment funds. These developments coincided with the disillusionment of countries with their strategies of prolonged protection and excessive state-control, and consequential movement towards economic liberalisation and macro-economic and "structural adjustment". Many of the developing countries found it advantageous to draw on TNCS for getting access to investible resources, advanced technologies, modern skills, management practices and external markets. This point has received credibility when some newly industrialising countries (NICS) followed market-guided and outward-oriented strategies and allowed FDI to play a dynamic role in bringing about dynamism in industrialisation and international trade.

India is one of the developing countries, which have introduced liberalisation policy and as its part relaxed the FDI regulatory framework on a selective basis with reference primarily to the industrial sector since 1991. Such a positive and 'open-door' policy of India towards foreign investment and technology transfer is in contrast to the earlier ambivalent and restrictive approach.