COMPARATIVE STUDY OF FDI IN INDIA, CHINA AND BRAZIL

Prakhar Gupta Rishav Raj Jay Khattar Ankit Asati

A QUICK REVIEW
At a glance: In recent years China ,India and Brazil have attracted huge amount of FDI from across the globe Thus, liberalisation and increasing integration of India with the global economy have helped step up FDI .

Still it lags much behind as compared to Brazil and China. Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China and 5.5% for Brazil

REASONS
India has lagged behind due to its focus on services & small manufacturing industry model in contrast to Chinas mega Manufacturing model as manufacturing remains the centerpiece of Chinas foreign investment sector. Similarly ,a variety of factors (high levels of corruption, acute income inequality and a long history of political-economic instability) has hindered Brazil from realizing its FDI potential.

A MODEL

The Log-Log Regression Model

We plot for log of FDI vs log of GDP. We also plot for log of FDI vs log of Export

INDIA (FDI VS GDP)

INDIA (FDI VS EXPORTS)

CHINA (FDI VS GDP)

CHINA (FDI VS EXPORTS)

Challenges/Problematics: Although FDI inflow to India has been increasing, regional distribution of the same is found to be more inequitable Chinese firms have been crowded out by the strong FDI inflow Brazilian economy faces he complexity of the interaction between the micro and macro economic dimensions of the internationalization of the economy

Future Prospects: In the year 2010, India has assumed a notable position on the world canvas as a key international trading partner by the of the implementation of its consolidated FDI policy. Now, the foreign investors can inject their funds though the automatic route in the Indian economy.

With China becoming the member of WTO in 2001, more and more of FDI has started to flow as a result of opening up of domestic market and better trade regulations. With the simplification of registration procedure for FDI inflows in the 90s it has led to a decline in the administrative costs associated with the entry of FDI inflows into Brazil.

Policy Suggestions: India must adopt a proactive FDI policy regime To ensure a more equitable regional distribution of such flows both central and state government should take concerted strategy for improvement in infrastructure facilities and creation of sound economic and political environment

Anti corruption rules and regulatory framework need to be implemented strictly in Brazil Also, India and Brazil clearly need to adopt policies that grow saving and investment so as to increase the productivity of its working population. Else there is a threat to be left behind the highly productive and skilled Chinese labor

THANK YOU