The two faces of Foreign Direct Investment

For a developing nation, foreign direct investment is considered economically beneficial. These benefits include; the transfer of technologies, the creation of employment, access to the global market and, the inflow of foreign capital. It is also observed that to lure foreign investors environmental norms are often relaxed. This emphasizes a negative impact on the environment of future generations. For sustainable development, it is important to balance economic development and environmental protection.

According to the pollution heaven hypothesis, it is observed that developed countries often relocate their industries to developing countries where environmental standards are not as strict as theirs. This results in the increased cost of protecting the environment.

To understand the impact of foreign direct investment on GDP, inflation, exports, total factor productivity and poverty were empirically analysed, since 1991. As there are many indices of poverty that have been used in the literature, per capita income was used as a proxy as an increase in per capita income implies poverty reduction.

1947

India gains independence from the British and adopts Socialism.

1958

India faces a major challenge of fiscal deficit along with famine.

1966

In the amid of war foreign aid was cut adding to rising inflation.

1991

India starts a new journey by opening its economy to the world.

2012

The world faces a global recession and India’s rising GDP slipped from 8% in 2007 to 5% in 2012.

2018

India surpasses France to become the 5th largest economy in the world.

Impact of FDI inflows on total factor productivity of India

This article attempts to empirically examine the relationship between FDI inflows and Total Factor Productivity... More

Inflow of FDI has a positive impact on the per capita income of India

This article investigates the impact of FDI inflows in India on the reduction of poverty.... More

Impact of FDI inflows on the rate of inflation in India

The purpose of this article is to empirically examine the impact of FDI inflows on... More

Analysis to find the impact of FDI inflows on the GDP of India

The aim of this article is to empirically analyse and investigate the impact of FDI inflows... More

Foreign direct investment plays a vital role to shape the Indian economy

Theories related to FDI
Trend and determinants of FDI
Pillars of the  Indian economy

The trend of exports, GDP and FDI inflow in India

India’s economy underwent a major change after the liberalization of policies in 1991. It is the major contributing factor towards the impressive growth of India’s GDP growth rate from 3.5% to 5.7% in the 90s while reaching 7.3% in 2007. FDI is one of the biggest contributors to this growing phenomenon. With the liberalization of the economy, the focus of the country shifted from the primary agricultural sector to the secondary and tertiary manufacturing and service sectors.

Trade openness, international competitiveness gain, technological up-gradation, and appropriate utilization of resources increased exports and FDI inflows. However, the trend saw breaks in some years, specifically in 2003 and 2008. This was due to the global economic crisis.

Low employment rate in the service sector cannot sustain high growth rate for long

The service sector is one of the fastest growing sectors in India. Contribution of this... More

Manufacturing sector in India before and after the liberalisation of 1991

A well-developed manufacturing sector is needed to provide the basic needs of the population. Similarly... More

An overview of the growing chemical industry in India

The Indian chemical industry has gained a major share in Asia’s growing contribution to the... More

After the year 2000, major FDI inflows were in the service sector including Telecommunications and Information Technology. The government allowed up to 100% FDI in several manufacturing segments such as drugs and pharmaceutical manufacturing and power generation. This led to the creation of opportunities for technological advancement, output generation, export promotion, and employment.

Investigating the relationship between foreign direct investment inflows and the environment

Environmental pollution is typically measured in terms of an increase in major air and water pollutants. To test the impact of FDI on the environment in the period of post-reform, a few indicators of air pollution and water pollution are taken as the dependent variables. Air pollution indicators include Greenhouse gases (GHGs), nitrogen dioxide (NO2 ), sulphur dioxide (SO2 ), and particulate matter (PM) among others. Water pollution indicators include both physical indicators namely temperature, biological oxygen demand (BOD) and chemical indicators namely phosphorus, nitrogen, and ammonia among others.

The environmental cost of economic development in India

Rising environmental concerns
The relationship between FDI and the environment
A committment to protect the environment

Inverse effect of economic activity on the environment

With the growth of the Indian economy, the environment quality has changed a lot. Greenhouse gas emissions increased from 3% in 2003 to 6% in 2012 and in the case of water pollution, the growth in the level of faecal coliform in major Indian rivers increased from (69%) in 2004 to 82% in 2012. This increase in pollutants after the shift of FDI inflows towards the service sector is mainly due to increased urbanization. This has resulted in a rise in demand for commodities like food, electricity, and automobiles. Increased economic activities have caused industries to release more pollutants like PM, O3, CO2, CO, NO2, SO2, faecal coliform, metals, and mercury into the water bodies.

Despite the existence of international and national level environmental regulations, due to efficient monitoring and control technology, the rise in pollution could not be kept in check. This study identified a continuous inflow of funds, eco-friendly technology and knowledge sharing toward the sustainable development of the country.