Foriegn Direct Investment

Private Foreign Investment in India
August 1999
Authors: Suma Athreye, Manchester School of Management, England Sandeep Kapur, Birkbeck College, University of London, England Address for correspondence Sandeep Kapur Department of Economics Birkbeck College Gresse Street London W1P 2LL UNITED KINGDOM

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Abstract
Private foreign capital, whose presence in Indian industry was long regarded with concern and suspicion, is now touted as a panacea for India’s economic problems. This paper compares the relative performance of domestic and foreign-controlled firms in India, and evaluates the contribution of foreign investment over the last five decades. We assess the impact of government policy towards foreign capital, and outline policy implications for the future. Keywords: India, foreign direct investment, MNCs, reform JEL classification: F21, F23, L6

Foreign investment in India

Private Foreign Investment in India*
August 1999

Abstract
Private foreign capital, whose presence in Indian industry was long regarded with concern and suspicion, is now touted as a panacea for India’s economic problems. This paper compares the relative performance of domestic and foreign-controlled firms in India, and evaluates the contribution of foreign investment over the last five decades. We assess the impact of government policy towards foreign capital, and outline policy implications for the future. Keywords: India, foreign direct investment, MNCs, reform JEL classification: F21, F23, L6

*

We thank the Company Finances Division of the Reserve Bank of India for data and guidance; John Cantwell and Ron Smith for comments.

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Foreign investment in India

1 Introduction
The 1990s have seen a marked increase in private capital flows to India, a trend that represents a clear break from the two decades before that. In the 1970s there was hardly any new foreign investment in India:

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