Nepal, Uganda, Ethiopia and Kenya and other LDCs while they are still borrowing from abroad. Larger FDI to India comes from a small country (Mauritius). . .
. Disadvantages of FDI The following criticisms are levelled against foreign direct investment. . Private foreign capital tends to flow to the high profit areas rather than to the priority sectors.
. The technologies brought in by the foreign investor may not be appropriate to the consumption needs, size of the domestic market, resource availabilities, stage of development of the economy, etc. . Foreign investment, sometimes, have unfavorable effect on the Balance of Payments of a country because when the drain of foreign exchange by way of royalty, dividend , etc.
is more than the investment made by the foreign concerns. . Foreign capital sometimes interferes in the national politics. .
Foreign investors sometimes engage in unfair and unethical trade practices. . Foreign investment in some cases leads to the destruction or weakening of small and medium enterprises. .
Sometimes foreign investment can result in the dangerous situation of minimizing / eliminating competition and the creation of monopolies or oligopolistic structures. .`Often, there are several costs associated with encouraging foreign investment. . .
. FDI in India The early witnessed reforms in the economic policy. This helped to open up Indian markets to FDI. FDI in India has increased over the years.
In India, FDI has been advantageous in terms of free flow of capital, improved technology, management expertise and access to international markets. The major sectors benefited from FDI in India are: (i) financial sector (banking and non-banking) (ii) insurance (iii) telecommunication (iv) hospitality and tourism (v) pharmaceuticals and (vi) software and information technology. FDI is not permitted in the industrial sectors like (i) Arms and ammunition (ii) atomic energy, (iii) railways, - - International Economics (iv) coal and lignite and (v) mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper etc., FDI inflow in India has increased from $ million in - to $ , million in - . It amounted to $ , million in - .
UNCTAD’s World Investment Report reveals