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Foreign Direct Investment in India - Report Example

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This report "Foreign Direct Investment in India" focuses on India that has registered the high rates of economic growth. Foreign investors are becoming increasingly interested in investing in the country, and India is emerging as a more competitive location to funnel foreign direct investment…
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Foreign Direct Investment in India
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Download file to see previous pages The Inward FDI Performance Index is the ratio of the country’s share in global FDI inflows to its share of the global GDP and India ranks 113th in this aspect, but in terms of the Inward FDI Potential Index, the country ranks 85th, thereby enhancing the attractiveness of this destination for purposes of investment. India has registered the highest rates of economic growth after China and appears poised to continue with high levels of growth. Foreign investors are becoming increasingly interested in investing in the country, and India is emerging as a more competitive location to funnel foreign direct investment as compared to both the Southeast Asian countries of Indonesia and Malaysia.
The nature of FDI investment prior to the WTO regime was directed towards seeking out and exploiting intangible assets such as new technology, brand names and knowledge base in target markets because exporting to these countries was difficult as a result of high trade tariffs and protectionist measures. (Caves, 1996). However, in the WTO regime, there has been a drastic reduction in trade tariffs and quotas have almost disappeared, as a result of which countries seek to exploit their intangible assets such as knowledge by exporting to these countries and augmenting their intangible assets by the partnership in knowledge management with the host countries. (Belderbos 2001; Florida 1997).
As a result, Multinational Enterprises are motivated to enter into and invest in areas where knowledge may be found and where it is possible to enter into a partnership with knowledge-intensive enterprises. India has a significant advantage over countries such as Malaysia and Indonesia because of the knowledge-intensive resources that exist in the country, especially in terms of IT services. Applying the OLI framework, which states that in order to take up cross border investments, a firm must possess some ownership advantages which allow it to compete against foreign firms. ...Download file to see next pagesRead More
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