WORKING TITLE:A Study on the Impact of FDI Inflows on Indian Economy.

BACKGROUND OF THE RESEARCH:This section reviews the empirical studies on the relation between FDI and economic activities in the host economy, which could facilitate in identifying the issues relating to the impact of FDI at the sectoral level. In the earlier stage, few studies had shown that FDI has a negative impact on the growth of the developing countries. The main argument of these studies was that FDI flows to Less Developing Countries (LDCs) were mainly directed towards the primary sector, which basically promoted the less market value of this sector. Since these primary products are exported to the developed countries and are processed for import, it receives a lower price for its primary product. This could create a base for the negative impact of FDI flows in the economy. INDIA ranks second in the world in terms of financial attractiveness, people and skills availability and business environment. This is revealed in AT Kearney's 2007 Global Services Location Index. Country's financial stability in the current environment of financial turbulence and a possible unwinding of macro imbalances sends clear message to the prospective foreign investors about India's position as an expanding investment destination. "India's external sector has displayed considerable strength and resilience since the reforms in 1991- despite several domestic as well as global political events and supply shocks in food and fuel........we partner with the global economy fully on the trade and current account while there is progressive liberalization of the capital account, consistent with the progress in reforms in the real, fiscal and financial sectors", observed Dr Y.V.Reddy, Governor of India's central banking authorities, Reserve Bank of India (RBI) at the World Leaders Forum in New York in April this year. "The strong macro-economic fundamentals, growing size of the economy and improving investment climate has attracted global corporation to invest in India. A major outcome of the economic reforms process aimed at opening up the economy and embracing globalization has led to tremendous increase in Foreign Direct Investment inflows into India", says country's powerful industry lobby CII. (Source:- http://www.indiaonestop.com) India has been growing very fast for last few years and it has shown impressive development since then. Indias economy has grown by many times since last few decades
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and it has become a very attractive destination for FDI. There is much reason for India's viability as a destination for foreign investment variables including disposable incomes, emerging middle class, low cost competitive workforce, investment friendly policies and progressive reform process all contribute towards India being an appropriate choice for investors and businessmen. The government of India has put in place a transparent FDI policy. Many initiatives have been taken to attract FDI in several sectors. Opening of many new sectors to FDI, raising FDI equity caps in sectors already opened and procedural simplification are major steps towards increasing FDI. Today, the FDI policy in India is widely imagined to be among the most liberal in the emerging economies and FDI up to 100% is allowed under the automatic route in most sectors. The Indian Government is committed to provide both private and public companies a very favorable environment to encourage FDI. Government has highly liberalized the foreign investment regime over the last decade. Today, FDI is allowed in almost all sectors except for a few sensitive areas such as defense. Also, FDI is allowed in number of sectors under the automatic route, except a few, for which approval from the Foreign Investment Promotion Board (FIPB) is required. India's foreign trade policies have been designed with a view to invite and encourage FDI in India. The process of regulation and approval has been highly liberalized. The Reserve Bank of India has arranged the governmental and obedience aspects of FDI. The country houses 28 states and 7 union territories. These have diverse investment opportunities and natural resources in them. These are further supported by technological and infrastructure advancements and supportive government policies. There has emerged a Competition among states to attract investment in their states and this has proved to be beneficial for the potential investor. Vast investment potential exists in sectors such as biotechnology, retail, real estate, roads and highways, power, telecommunications, civil aviation, special economic zones, healthcare.

AIM:To understand and analyze the trend of FDI in India and its impact on Indian Economy.

RESEARCH OBJECTIVE:1. To determine the various factors that attracts FDIs towards Indian economy. 2. To measure the trends of FDI inflow in Indian. 3. To measure the percentage change in growth of various sector due to inclusion of FDI in India. 4. To observe the various socio-economic changes in Indian various sector.

HYPOTHESIS:Null Hypothesis (H0) :- The FDI doesnt have any impact on Indian economy.

Alternate Hypothesis ( H1):- The FDI has an impact on Indian economy. RESEARCH METHODOLOGY:Stage-1 Sample Design:Sample Unit:- Various Industrial sectors in India. Sample Size:- 10 types of industries. Sampling Type:- Non probability judgment sampling

Stage-2 Approaches Research Design:1. Research Design: Causal Research Since it is an investigation into an issue that looks an effect of FDI on Indian economy. This will assist us in the future business plantings in India 2. Data Collection:Secondary sources 3. Statistical tools:T-test and ANOVA 4. Data Analysis:Tabulation Interpretation and Analysis
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Stage-3 Scope of the study:This study is helpful to analyze the impact FDI in retail sector in India and to understand its effect on economic growth of the country.

Stage-3 Limitations of the Study:This study is limited to only particular industries in India and it doesnt consider all the various sectors. Indian has both organized and un-organized sector and the un-organized sector is as big as organized sector in India. Un-organized sector is independent with FDI. If there is any chance of flow into un-organized sector it is cumbersome to gather the data from un-organized sectors. Therefore the research is limited to organized sectors in Indian economy.

FDI Inflows financial year wise

Financial Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-2012(JAN) Total

Total (In US Billion $)

4 6.1 5 4.3 6.1 9 22.8 34.8 37.8 37.8 25.9 26.19 219.79

% of Growth in FDI
___ 53% -18% -14% 42% 48% 153% 53% 9% 0% -31% 1% --

1 Billion = 1000 Millions 1 Billion = 100 Crores

FDI TREND
40 35 30 25 20 15 10 5 0 Total ( all sectors)

% of Growth in FDI YEAR-WISE

200% 150% 100% 50% 0% -50% % of Growth in FDI ___