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The influx of Foreign Direct Investment (FDI) since 1990 has changed the dimension of Indian economy. FDI has both positive and negative effects on the economy if not framed properly. In this paper, an attempt has been made to evaluate India's FDI policy with special reference to industrial sector and its sub-components viz., mining, manufacturing and power. A further attempt has been made to check compatibility between India's FDI policy and new industrial policy. The impact of India's FDI policy on various factors such as wage rate, profits, employment and export has also been analyzed along with crowding-in and crowding-out impact of FDI on India's domestic investment in Industrial sector. A brief comparative analysis has been done between India and China with respect to their FDI policy and its impact on growth of industries and exports. For econometric analysis, appropriate econometric tests have been run viz., multiple regression, co-integration, granger causality test, panel unit root test in E-Views.
Keywords : Foreign Direct Investment, Industrial Policy, Crowding-in, Crowdingout, Exports.
(ProQuest: ... denotes formulae omitted.)
Introduction
Promotion of Foreign Direct Investment (FDI) forms an integral part of the industrial policy of India. FDI helps in accelerating economic growth by means of infusion of capital, technology and modern management practices. Government has put in place a liberal and transparent foreign investment regime, wherein FDI, up to 100 per cent is allowed, under the automatic route, in most sectors and activities.
FDI means investment by non-resident entity or person resident outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (transfer or issue of security by a person residing outside India) Regulations 2000.
New industrial policy of India mainly focuses on deregulation, freedom and flexibility in responding to market forces and providing a policy regime that facilitates and fosters growth of Indian industry.
Industrial Policy Measures
Some of the important policy measures announced and procedural simplifications undertaken to pursue the above focus areas are as follows.
* Liberalization of Industrial Licensing Polity : At present, only five industries are under compulsory licensing mainly on account of environmental, safety and strategic considerations.
* Policy for Small Scale Industries (SSI) : During the last five years, more than 600 items have been dereserved....