The report brings out the discussion on how country is political advantages, economic advantages, social advantages, technological advantages; natural resources can favour FDI in India. India has a good supply of its natural resources and labour force. This is the reason why garment manufacturing is popular in India. The bulk amount of its production of garment industry has contributed to exports on the part of the company. The chosen country to invest in is “India” that have diversified needs of the goods. Where people are below poverty line and also earns in millions. Majority of population id India is young population that encourages business ventures (Ali, Ibrahim, and Mohamed, 2017).
India is the second most populated and seventh largest country in terms of area in the world. As far as the history of economy of India is considered, the economy of the country started through a gold loan. Leaders lend country`s gold and assisted from the foreign world. The country suffered from foreign fiscal deficits and the diversity of products manufactured was low. Moreover, the concept of production was very popular as the company who produces much has controlled the whole economy and the production could only meet country`s demand. Moreover, due to import of smuggled goods (mostly luxury) the country started losing its current state of economy. Therefore, it started to stop the import of goods especially fir consumption. It just accepted the entry of capital goods.
Earlier when country does not have enough goods to export, it stopped its import too and focused only on capital goods. Currently, the era is all changes, now country leaders promote new business idea. “Make in India” was a strategy that succeeded and encouraged people to invest in the country. As more investment from FDIs could lead to more employment rate and better life styles of people (Kathuria, Ray, & Bhangaonkar, 2015). The political system of country does not fluctuate very frequently. It generally lies between Congress or BJP and both of them encourages FDIs but BJP had a revolutionary time for the country from 2014. It enacted demonetisation and imposition of GST taxation system. Although, the political environment of country remains stable but during demonetisation and imposition of taxation system, its political system has a very strong impact on political stability.
With the increasing globalisation and liberalisation, international business encouraged the countries to export. Currently, no single commodity dominates the market. When gems and jewellery is considered, India is among those countries that export gold and other metamorphic rocks. Apart from this, the country`s export products have a large proportion of ready-made garments and leather products that reflects that India has a large pool of labour as it is second most populated country. Currently, while considering India’s economy, it has been growing with a GDP (Gross domestic product) of 5 and 6 percent. Moreover, it is expected that until 2020, it will start enhancing with a rate of 7 or 8 percent. India has started giving much importance to special treatments for the products or projects that may have reduced the benefits from FDI. It attempts to speed up particular sector such as authorities have negotiated on each case where it deals with special conditions for investor. In case, countries from which the company belongs to do not attract FDI they end dissipating potential profits from investment. Direct incentives to foreign investors can lead to unfair discrimination among domestic and foreign investor.
Introduction of more featured products enforce oneself to shift its demand to efficient product that meets the demand and have more features at such a low price. India`s culture has been emerging and bending same as the culture of other countries as it has understood the importance of independency especially among women. Although, many people say western culture is ruining and spoiling the national culture. Moreover, it has promoted a sense of freedom and self-dependency. Engagement of MNCs plays an important role in contributing to the economy with the increasing demand of the customers. Day by day, the people have started focusing on increasing their spending capacity or purchasing power of the customers. People`s basic demand have increased and they have started preferring branded things more (Wang, & Wu, 2016).
Technology brings more efficient operation in business because it can be either it will lead to low cost strategies. Moreover, employing less labour can save cost of wages that can be more than operation of machines. FDIs help the country to become more advance in terms of technology as one is it becomes part of the economy. Other organisations start creating demand for the same machine as it has created efficiency in production. Technical development also requires high experienced workforce to operate the machinery and as a government it employs and encourage the people to learn certain skills and certain institution that can help them to grow (Siddiqui, & Ahmed, 2017).
FDI is an important activity that drives to transfer technology, resource-rich availability, and economic growth. Natural resources often attract the MNCs that have the ability to extract knowledge and capital. FDI is an capital incentive activity that leads to low spill overs because one`s experts analysed the necessity to use the product because it do not rely on sub-contractors and suppliers (Poelhekke, and Ploeg, 2010). Non-resource FDI has more scope of spillovers because they do not use it very frequently tries not to take any permission from the government as it takes a huge time. For example- Japan is not at all behind of anyone in terms of innovation and talented workforce but it lacks natural resources and floods and earthquakes often stick it. Whereas country like India has considerable level of natural resources in form of wildlife sanctuaries and good water resources. It is that competitive advantage that a country can not build but it is by the grace of nature. This always remained to exploitation of natural resources, which is good for health (Liu, Agbola, & Dzator, 2016).
Foreign exchanges provide an exchange rate at which buyer and seller exchange the products across the borders. This shows that there always remain a positive correlation of real exchange rate and FDI that may predict and lead to apply a model. If fluctuation in the market is large enough it will affect the driving force for evolution of exchange rates. While expanding employment and production activities, which experience a set of exchange rate system (Wen, 2014). The organisation is expecting to have a high expected profit and this would not lead to diversified by FDI. In order to attract the MNCs, a company can improve its stable exchange rate that is significant to both FDI and exchange rate. According to CHEN, RAU, and LIN, international business community is one important factor that aims to undertake FDI decision because depreciation and devaluation of assets can contribute to currency that gives foreigners to keep an edge in making purchasing decision that has affected the amount of country`s assets (Pradhan, 2017).
Concept of trade policies is characterised by dual economy traits. High wage rate system and a capital industrial sector exists but with low wage traditional sectors. Dualism occurs due to two major reasons, which are such as dualism that can be a sign of markets, which are poorly working. The creation of dualism is created and characterised by economic dualism. Modern sector differs from traditional sector that has higher wages, lower returns to capital, higher value of output and higher capital intensity. The trade policy can be rigid enough that imply different laws from different companies. Wage differs due to manufacturing and agricultural that justifies encouraging manufacturing at expenses (Sangwan, 2015).
Many MNCs has to follow the rules and regulations of the country in which they operate. According to department of industrial and promotional policy, total investment as foreign direct investment from April to June stood for US $ 12.75 billion in 2018 (Pradhan, 2017). It indicates to improve the ease of doing business and relaxing them while yielding profits from FDI. In India, major states that has contributed to FDI are Maharashtra, Gujarat, Tamil Nadu, and Andhra Pradesh. It is important to note that India has already invested $1 trillion for infrastructure from 2012-2017 (Pradhan, 2017). More than 40 percent of $ I trillion had to be funded by private sector. Moreover, 100 percent FDIs has been given permission of automation route for the construction cities and towns (Malhotra, 2014).
FDI (foreign direct investment) is necessary for economic growth. There is always a basis for which the particular sector can be promoted against each other. It is important to understand and establish FDI to know hoe efficient is the country to establish an organisation in a country. It is beneficial for high level of capital that provides innovation in different activities. One important thing is that every country should treat both local and foreign investors equally. Important rules for countries is that foreigners should have same rights as locals. As country kept developing, it was expected that capital flows in the country must be increasing. Fluctuation level or different exchange rates offer a price on which buyer and seller adjust to buy. As a recommendation, the country`s economic departments should provide incentives to the organisations and MNCs that are willing to launch their operations. Moreover, the country offers MNCs their highly skilled experts of every field that can help the organisation to deal with new business environment and lead them to employment that will ultimately lead to removal of unemployment from the country.
References
Ali, A., Y., S., Ibrahim, I. M., and Mohamed, Z. (2017). Impact of Change in Exchange Rate on Foreign Direct Investment: Evidence from Somalia. Retrieved from: https://www.researchgate.net/publication/316962340_Impact_of_Change_in_Exchange_Rate_on_Foreign_Direct_Investment_Evidence_from_Somalia
Kathuria, V., Ray, P., & Bhangaonkar, R. (2015). FDI (foreign direct investment) in wind energy sector in India: Testing the effectiveness of state policies using panel data. Energy, 80, 190-202.
Liu, W. S., Agbola, F. W., & Dzator, J. A. (2016). The impact of FDI spillover effects on total factor productivity in the Chinese electronic industry: a panel data analysis. Journal of the Asia Pacific Economy, 21(2), 217-234.
Malhotra, B. (2014). Foreign Direct Investment: Impact on Indian Economy. Global Journal of Business Management and Information Technology, 4(1), 17-23.
Poelhekke, S. and Ploeg, F. V. D., (2010). Do Natural Resources Attract FDI? Evidence from non-stationary sector level data. Retrieved from: https://www.dnb.nl/binaries/266%20-%20Do%20Natural%20Resources%20Attract%20FDI_tcm46-242555.pdf
Pradhan, J. P. (2017). Emerging multinationals: A comparison of Chinese and Indian outward foreign direct investment. Institutions and Economies, 113-148.
Sangwan, S. (2015). Making “Make in India” a realism: role of FDI. International Journal of Applied Research, 1(7), 770-773.
Siddiqui, A. A., & Ahmed, S. (2017). Impact of Foreign Direct Investment on Sectoral Growth of Indian Economy. International Journal of Economics and Financial Issues, 7(3), 477-488.
Wang, C. C., & Wu, A. (2016). Geographical FDI knowledge spillover and innovation of indigenous firms in China. International business review, 25(4), 895-906.
Wen, Y. (2014). The spillover effect of FDI and its impact on productivity in high economic output regions: A comparative analysis of the Y angtze R iver D elta and the P earl R iver D elta, C hina. Papers in Regional Science, 93(2), 341-365.
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