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    Factors Affecting

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    Harsh Vijay
    The document discusses several key factors that affect foreign investment in India including economic growth, market size, infrastructure, exchange rates, and political stability. It also provides an overview of India's foreign direct investment policy and reforms since 1992 to attract more foreign investment and promote economic growth.

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    Factors Affecting

    Uploaded by

    Harsh Vijay
    47 views1 page
    The document discusses several key factors that affect foreign investment in India including economic growth, market size, infrastructure, exchange rates, and political stability. It also provides an overview of India's foreign direct investment policy and reforms since 1992 to attract more foreign investment and promote economic growth.

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    The document discusses several key factors that affect foreign investment in India including economic growth, market size, infrastructure, exchange rates, and political stability. It also provides an overview of India's foreign direct investment policy and reforms since 1992 to attract more foreign investment and promote economic growth.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    47 views1 page

    Factors Affecting

    Uploaded by

    Harsh Vijay
    The document discusses several key factors that affect foreign investment in India including economic growth, market size, infrastructure, exchange rates, and political stability. It also provides an overview of India's foreign direct investment policy and reforms since 1992 to attract more foreign investment and promote economic growth.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Harsh Vijay

    IPM/2231/02

    Factors Affecting Foreign Investment


    1. Economic Growth
    One of the most important factors that attract foreign investment is the economic growth of a
    country. India's economic growth has been impressive in recent years, with an average
    growth rate of 7.5% between 2014-15 and 2018-19. This has attracted significant foreign
    investment, with FDI inflows increasing from USD 36.04 billion in 2013-14 to USD 44.37
    billion in 2018-19

    2. Market Size
    In a developing country, FDI is mostly used to enter the domestic market.
    As a result, one of the most crucial factors affecting market seeking FDI is the size of the
    market. For instance, India's GDP growth rate was 7.5% in 2019-20, which led to FDI
    inflows of USD 36.7 billion, up from USD 1.1 billion in 1990-91.

    3. Infrastructure
    Infrastructure plays a crucial role in attracting foreign investment, as it is necessary for the
    efficient movement of goods and services. India's inadequate infrastructure has been a
    challenge for foreign investors. For instance, the World Economic Forum's Global
    Competitiveness Index 2019 ranked India 70th out of 141 countries in terms of infrastructure.

    4. Exchange Rate
    The exchange rate between a foreign currency and the Indian rupee can also impact foreign
    investment. A weaker rupee can make investments in India more attractive. In 2020, the
    average exchange rate was INR 73.41 per US dollar. The current Exchange Rate is 1 USD=
    INR 82.19.

    5. Political Factors
    The political climate also has a major role in a country's ability to entice foreign direct
    investment. Since the danger to foreign investors rises with political instability, foreign
    investors prefer it when a country's policies are stable and transparent enough to adequately
    protect their capital. India's stable political environment has been a factor in attracting foreign
    investment. For instance, FDI inflows increased by 18% in 2019-20, despite a global decline
    in FDI inflows due to the COVID-19 pandemic.

    We talked about the factors affecting the foreign investment. Now let’s hover through a
    foreign investment policy in India namely, Foreign Direct Investment Policy or FDI Policy
    The FDI policy typically outlines the rules and regulations for foreign investors to invest in
    various sectors of the economy, such as the manufacturing sector, service sector, and
    infrastructure sector.
    FDI in India
    FDI Policy was formulated in India in 1992. From then, India has been pursuing a liberalized
    policy for many years to attract foreign investment and promote economic growth. The FDI
    policy in India is formulated and regulated by the Department for Promotion of Industry and
    Internal Trade (DPIIT) under the Ministry of Commerce and Industry.

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