In the present emerging global economy, the nature of the foreign investment has to be generally motivated by various favorable business environments accelerated by globalization, liberalization as well as privatization of capital flows which have been growing rapidly. Also the cross-border M&As have been seen as pivotal in the recent surge in the foreign direct investment. Accordingly, the international capital flow contributes a great role of the domestic investment, employment generation, industrial production and even the export in various global economies including India. Even though, there are only two globally recognized foreign investment via, foreign direct investment, as well as portfolio investment, it has also been followed by three main global economic motives of the foreign direct investment like: resource factor as well as marketing factor and efficiency factors. However, the main objective of this paper is to stage on how the Indian government has substantially liberalized its nature of foreign investment policy, even though the foreign direct investment inflow into the Indian economy has been discouraging.
[...] Due to such variation in the nature of capital flows and even substantial growth in the size of other capital flows like foreign direct investment have generally resulted to changes in the nature of the balance of payments as well as the foreign exchange reserves of various low developing countries. In addition to the above, the debts which courses the flows of the ratio of balance of payment of India is averaged 97% during the year 1985-90 of which during the year 1990s is declined to less than 20%. [...]
[...] (US $ Millions) 1991-92 1992-93 1997-98 2001-02 Direct investment Portfolio investment FIIs - Euro equities - Offshore funds Total Source: Government of India, Economic survey 1996-97 and 2002-03 EVALUATION OF THE NEW POLICY:- However, according to our findings, the liberalization has increased the inflow of the foreign capital to Indian economy in comparison with other developing economies; it has been so very much lower. In the year 1997 it grew to $ 3.57 billion and at the same period the foreign direct investment to Indian economy dropped to $ 2.16 billion. [...]
[...] Equally, the nature of low cost of production of which is encouraging cheaper labor is the main factor attracting the foreign direct investment in developing economies. In recognition to this, the sense of export processing zone have been generally influenced and developed by the developing economies. In relation with the above, the main demanding and forcing factor of the foreign direct investment in the present emerging global economies are: There must be stable macro economic policies. The government should be stable and honest. Markets must be growing in large number. There must be freedom of transaction in various activities in the markets. [...]
[...] Also in 1970s direct foreign investment dropped from 1981-86 and finally in the year 2000 it increased to $ 12.75 billion. DISPERSION OF FOREIGN DIRECT INVESTMENT:- According to our own findings, major portion of the foreign direct investment is being distributed between the developed economies like US, European countries and even Japan. This is true because in the year 1999, USA and UK were the main leaders over the same in both cases of recipients and investment. In relation to this, the share of the foreign direct investment of which was exactly distributed to developing economies fall to the ratio of 25% in the year 1980-85 and then to 17% in the year 1986-90. [...]
[...] Sound growth in global financial assets Good growth in developing economies nature of exports and even the capacity to serve foreign debts. Sound industrial and economic growth of the developing economies. Increased and diversification of investors portfolios. Growing resource of the investors as well as faster equity markets in developing economies CROSS-BORDER M & M & As is the most important aspect of the foreign direct investment in 1999, the value of M & As amounted to $ 720 billion of which circumvented 80% of the total foreign direct investment as it is compared to the past years of 1977 with the ratio of $342 billion. [...]
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