Volume - 02 Issue - 01 January March 2016 SHODH-CHETANA ... · 5] Dr.AmrutaDeshmukh 6] Prof.Nitin...

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SHODH-CHETANA

CHETANA

Volume - 02 Issue - 01 January – March 2016

ISSN: 2454 - 1877

ISSN : 2454-1877

SHODH-CHETANA January – March, 2016. Issue 01

CHIEF EDITOR

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EXECUTIVE EDITOR

Dr. Prashant Bhagat

VOLUME 02

SHODH-CHETANA Vol. II; Issue. 1 January – March 2016

1] Prof.B.A.Hosur 2] Prof.M.P.Borkar

3] Dr. K.L.N. Sastry 4] Dr.P.P.Malwadkar

5] Dr.AmrutaDeshmukh 6] Prof.Nitin G. Rindhe

7] Prof.Vijay Fulkar 8] Mr. Sanjay More

9] Prof. Mihir Shah 10] Prof.Amit Zodgekar

11] Prof.BhaveshVaity 12] Prof.Niyomi Patel

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From the Editor’s Desk

Dear Reader,

I am pleased to publish first issue of the second volume of our journal ‘Shodh – Chetana’, a

great initiative from our side to encourage the frontier of research across the world. It is a multi-lingual,

fully Referred Research journal and it’s Advisory Board Consists of the best minds in different arena.

This Journal will develop writing skills among academicians and researchers fraternity and

will provide them platform form for free expression of creativity and innovative thought process. This

journal will build a common forum for researchers, practitioners and academicians to share their research

findings, exchanging new theories and promoting good practices in different areas of research.

Current issue of the journal has got papers from academicians and researchers. It contains

research papers, case study and book reviews. It is our sincere efforts to provide a meaningful platform to

academia, researchers and practitioners to jointly explore new concepts, ideas, theories and different

applications in research areas.

I invite feedback and suggestions from the readers, researchers, academicians for further

improving the quality of the journal.

Happy Reading,

Mr. Prashant H. Bhagat,

Executive Editor,

Shodh-Chetana Research Journal,

Mumbai – 51.

Shodh-Chetana ISSN: 2454 – 1877 January - March, 2016 II

SHODH-CHETANA

VOLUME: 2 ISSUE: 1 JANUARY-MARCH 2016

CONTENTS

Sr.

No. Research Title Author Page No.

1 Opportunities and Challenges for Sustainable R&D in India Prashant Bhagat

Mihir Shah

001 – 007

2 Banking Reforms in India: Challenges, Growth and Progress B R Kamble 008 – 014

3 Goals of Sustainable Development: A Case Study of India Asha R Kadam 015 – 019

4 FDI Prospectus And Issues Special Reference to the Power

Sectors Of India.

Ravindra Netavate 020 – 024

5 FDI in Human Resource Development

Mousumi Manna 025 – 032

6 Critical Appraisal of trends and policies of FDI in India Sidhdeshwar Bhosale 033 – 039

Shodh-Chetana ISSN: 2454 – 1877 January - March, 2016 III

Opportunities and Challenges for Sustainable R&D in India

*Bhagat, Prashant

* *Shah, Mihir

Introduction

Many definitions of R&D are given by various organizations. The UNESCO defines R&D as - ‘R&D is

any creative systematic activity undertaken in order to increase the stock of knowledge, including

knowledge of man, culture and society, and the use of this knowledge to devise new applications’. The

United Nations statistics division defines R&D as - ‘Research and Development by a market producer is

an activity undertaken for the purpose of discovering or developing new products, including improved

versions or qualities of existing products, or discovering or developing new or more efficient processes of

production’.

Whatever the definition of R&D is, it is important for nations to increase their income and improve

quality of life of their people. Hence, for R&D to grow and sustain, many countries offer generous grants,

incentives and credits. To make the R&D investment cost effective for individual industries, there is a

necessity for governments to step in and support R&D efforts in specific areas. These can yield

significant benefit to the nation as a whole. The rationale for government participation in R&D may

include the following:

• The innovation may lead to cost reduction of products and process for society.

• For some sectors such as national defence, railways etc. it is imperative for government to

participate in R&D.

* Asst.Professor in Commerce, Chetana’s H.S.College of Commerce and Economics, Bandra (E),

Mumbai – 51. Email Id: [email protected] , Mobile: 9323588234.

* *Asst.Professor in Commerce, Chetana’s H.S.College of Commerce and Economics, Bandra (E),

Mumbai–51.Email-Id:[email protected],Mobile:9969502166.

Shodh-Chetana ISSN: 2454 – 1877 January - March, 2016 001

Abstract:

The Research and Development (R&D) is an important contributor to economy of any country and hence

growth and sustainability of R&D vital for nations. As the pace of technology is accelerating and newer

technologies and processes are becoming important, R&D is becoming a crucial factor in success of the

companies and economies in a globalised and competitive world. Companies that consistently and

persistently invest in R&D outperform others. Though R&D is generally undertaken by industry and

academia, the government plays a key role in developing policies that foster R&D and its sustainability.

India’s economic growth in the recent years has been impressive due to government policies and acts

including Science and Technology Policies increase in spending in R&D and tax incentives. With current

government policies and acts, there are many opportunities for domestic as well as foreign companies to

invest in R&D in India and establish the competitive position in domestic as well as export market.

However, the opportunities that are encouraged by policies, spending and tax incentives are also

accompanied by many challenges to create a strong and sustainable R&D.

This paper makes an analysis of opportunities available to industries and challenges faced by them in

India for sustainable R&D.

Keywords: Innovation, Opportunities and Challenges, R&D, Sustainability, Tax Incentives.



In some sectors such as environment, eco-friendly products non-conventional energy etc. industry

may not pursue innovations unless regulations or other policies mandate such requirements.

R&D that is costly and has a high chance of failure may exceed the risk threshold of the private

sector.

R&D that has a long gestation period is likely to fall short of the private sector’s requirement for a

rate of return.

With globalization, many of the technology resources once limited to advanced economies such as U.S.,

Japan, and Europe are being indigenously developed in emerging economies such as India, China, Korea,

Brazil, and Eastern Europe. These countries are now able to compete with the leading countries in R & D

for development of the sophisticated and complex new products.

More than 30 countries offer specific R&D tax incentives related to development activities manufacturing

process improvements, production trials, software integration and laboratory research. These incentives

create an immediate cash benefit and reduce effective tax rates. The Indian government has takenmany

initiatives through formulating innovative policies that are comparable to many nations to boost R&D in

the country. These initiatives have created many opportunities for private sector and institutions to

participate in R&D programs and increase their R&D expenditure. With new R&D policies, India is on

the brink for a massive upsurge in economic and social growth and is on a path to becoming a technology

driven superpower in the coming years.

GLOBAL R&D SCENARIO In terms of R&D spending, United States is the largest of the global spenders on R&D followed by Japan and China. In Europe, he major spenders are Germany, France and the UK.

Table-1 shows a snapshot of the share of global R & D spending and R&D spending as a percentage of GDP for year 2012.

INDIAN R&D SCENARIO

The Indian R&D system is still in its nascent stage. As shown in Figure-1, around 80 percent of the

domestic R&D is taken by the public sector, 20% by private enterprises and 3% by universities compared

to 69 % by private enterprises, 18 % by universities, 10% by government R&D labs and 3% non-profit

institutions in countries belonging to OECD. Though the investments for R&D in India lagged behind

that of China, the EU and the U.S until recently, the Indian government has made efforts to drive

investments in S & T that is reflected in India’s five-year plans. The government has plans to raise the

overall spending on R&D to minimum 2% of the GDP by the end of the 12th Five-Year Plan (2012-

2017). It has also felt the requirement of greater participation from the private sector. The key driver of

R&D activity in India is large multinational companies (MNCs). MNCs are setting up dedicated

andindependent R&D centers for taking up R&D activities in new and emerging research in high tech

areas. This is a major driving force behind India becoming an R&D powerhouse. The flow of foreign


R&D is mainly concentrated in areas such as electronics and telecommunication, software, automobile,

drug and pharmaceuticals, hardware and product design (Table- 2). More than 300 MNCs have setup

their R&D centres in India. Though many MNCs like GE, Astra Zeneca, Texas Instruments, Motorola,

DuPont, Intel etc have set up R&D centres in India, the domestic players such as Tatas, Birlas, Biocon,

Godrej, and others have also participated largely.

Fig. 1: % of R&D undertaken by various agencies

TABLE 2 R&D FOCUS AREAS BY MNCS

MNC R&D FOCUS AREAS

GE Composite Material Design Electromagnetic Analysis Non-destructive evaluation technology

Honeywell Next generation magnetic sensors Image analysis and computer vision Intelligent vehicle technologies

General Motors Smart system modelling Vehicle structure and safety Chemical reaction modelling

Philips Healthcare system technologies Energy and lightning Consumer lifestyle technologies

EADS High performance computing Avionics Structures

Siemens Decentralized energy systems Embedded Systems S.M.A.R.T. technologies

3M Abrasives/adhesives Coatings NVH materials

ABB Manufacturing technologies Communication technologies Robotics

Source: Zinnov Research and Analysis

IV. OPPORTUNITIES FOR R&D IN INDIA

Many opportunities exist to carry out R&D in India for Small and Medium Enterprises (SMEs) and

academic institutions not only for domestic but also internationalcompanies. Following are the factors

which boost these opportunities:

• Large and rapidly growing market for products.

• 100% foreign ownership and full repatriation of capital and profits.

• R&D programs under the chapter of trade in services of WTO

• Large pool of English speaking skilled manpower

• Telecom infrastructure comparable to that in many countries.

• Geographical location enabling 24x7 service offerings.

• Good regulatory framework.


Apart from the benefits listed above, many opportunities for R&D originate from the tax incentives and

the Intellectual Property Rights (IPR) protection as detailed below.

A. Tax Benefits

Currently, India has a very favourable tax regime for R & D. The benefits provided in India can be

categorized as super deductions for expenditure incurred, super deductions for contribution, customs duty

benefits and various state government incentives. The rates of super deductions in India are comparable

with those across the globe. India has over a period of time enhanced the super deduction to a whopping

200% that is on par with countries such as Singapore, Malaysia, Hungary etc. Table-3 summarizes the

incentives offered to various industries and institutions.

The direct and indirect tax benefits are summarized below:

1) Direct Tax Incentives

There are a host of benefits offered under the Income Tax Act, 1961 for R&D activities carried out in

India as well as contributions made towards R & D. The Act and the related Rules specify the eligibility

criteria as well as process for availing these benefits.

The benefits available under the Income Tax Act can broadly be categorized into the following

• Benefits for expenditure on R & D for carrying out R&D activities related to business.

• Benefits for manufacturing entities carrying out R&D activities.

• Contributions for R&D.

2) Indirect Tax Incentives

Given the importance of R & D, in addition to the direct tax benefits, various incentives in the form of

lower excise and custom duty are provided. These benefits could be available either for import of capital

goods by the enterprise for specified purposes, or for carrying out R & D. The benefits are classified into

the following sections.

Section I - Incentives for in-house R&D

• Export Promotion Capital Goods (EPCG) Scheme

• Customs exemption for import of specified goods for R & D

• Customs exemption for manufacturers in the Agro chemical sector

Section II - Incentives for carrying out R&D as a collaborative arrangement

Section III - Incentives for carrying out R&D for others

• Served From India Scheme (SFIS)22

• Export Promotion Capital Goods (EPCG) Scheme

• Customs exemption

• Excise exemption


3) State Government Incentives

Apart from the direct and indirect tax benefits offered by the central government, many state

governments have the incentives for various industries.

B. IPR Protection

IPR plays a key role in sustainable R&D and has become a crucial factor for investment decisions by

many companies. The IPR Acts and regulations in India are at par with international standards. India is

now TRIPS (Trade Related Aspects of Intellectual Property Rights) compliant which is an international

agreement administered by the World Trade Organization (WTO) that sets down minimum standards for

many forms of intellectual property (IP) regulations as applied to the nationals of other WTO Members.

The very well-balanced IPR regime in India acts as an incentive for foreign players to protect their

Intellectual Property in India.

CHALLENGES FOR R&D IN INDIA

Some of the challenges faced for sustainable growth of R&D in India are:

R&D. Majority of the patents filed in India are owned by MNC’s, less than 10 % is owned by Indian

companies.

ndustry are still weak compared to Europe or America.

&D in Indian universities is a very

small part of innovation in India.

-time equivalent R&D professional strength of only 150 professionals per

million, compared to that of other countries as shown in Figure-2.


ards basic research and lacks in application oriented R&D. The

vast majority of organizations would rather go for quick acquisition of technology rather than invest in

internal R&D.

ng the science, focusing on

patenting and publishing, very little systematic attention is being spent in applied R&D.

the protection of intellectual property remains weak in some areas owing to inadequate laws and

ineffective enforcement.

-competitive.

For the R&D to grow and sustain, many challenges such as the uncertainty, high degree of

complexity,difficulty in framing clear specifications, need for continual course correction, constraints of

outsourcing process etc. need to be overcome, especially if the investments are high and anticipated

return are low. Also, the investment in R&D may not always fetch returns immediately. The outcome as

well as the path to be adopted may not be fully clear at the beginning of a R&D project, and hence

varieties of challenges are encountered in every stage of R&D execution. A single solution may not be

feasible for all the challenges. However, an integrated approach can help in overcome the challenges of

R&D that will help brining the growth and sustainability to R&D.

VI. CONCLUSION

India is a strong contender in the field of Global R&D. For India to derive maximum growth and

sustainability of R&D, its R&D fundamentals have to be strong and excellent. Currently, the India’s

spend on R&D is around 2% of the global spend (China spend is around 12%). Though the major MNCs

have considered India as a favourable destination, India needs to have wider policies to attract more

investments in this area. The Direct and Indirect tax benefits, though comparable to many countries,

appear to be very limited as most countries provide for duty drawbacks, VAT benefits, wage benefits etc.

for R&D.

Fig. 2: Full Time Equivalent R&D Professional Strength per Million

To sustain high rate of growth of economy and to establish itself as a global R&D and innovation hub,

India needs to pay serious attention to R&D. The Indian companies need to strengthen their in-house

R&D and develop original products and technologies to global standards. The linkages between industry

and academia need to be made stronger. In the field of education, R&D and research based curriculum

should start at early stages and more foreign universities should be allowed to enter. The industry needs

to move away from the quick acquisition of technology and invest in internal R&D.


REFERENCES

[1] Research and Development, A concept Paper, July 2011, Deloitte Touche Tohmatsu India Private

Limited

[2] UNESCO Statistical Yearbook, UNESCO, Paris, 68 and 65, Chap. 5.,

http://stats.oecd.org/glossary/detail.asp?ID=2312

[3] http://data.un.org/Glossary.aspx?q=R&D

[4] http://www.deloitte.com/view/en_GX/global/services/tax/business-tax/r-and-d-and-government-

incentives/index.htm

[5] http://www.planningcommission.nic.in/aboutus/committee/wrkgrp12/sandt/wg_csir2905.pdf

[6] http://news.indiamart.com/story/centre-wants-double-spending-rd-by-end-12th-five-year-plan-pm-

manmohan-singh-155610.html

[7] http://www.rdmag.com/articles/2011/12/2012-global-r-d-funding-forecast-r-d-spending-growth-

continues-while-globalization-accelerates

[8] Mohsin U. Khan, India’s R&D policy and its influence on technology development and society,

National Institute of Science Technology and Development Studies, New Delhi-110012,

http://is.jrc.ec.europa.eu/pages/documents/Khan_RD%20Policy%20of%20India.pdf

[9] Global Guide To R&D Tax Incentives, 2009, Alvarez And Marsal,

http://www.avanzia.com.mt/Portals/31/documents/publications/global_guide_to_r&d_tax_incentives.pdf

[10] Policy Brief July 2008, OECD Observer

[11] Background Paper, Industry and Academia Linkages, FCCI, Battelle India and ISB


Banking Reforms in India: Challenges, Growth and Progress

*Kamble, B.R.

Introduction

India is one of the top 10 economies in the world, where the banking sector has tremendous potential to

grow. The last decade saw customers embracing ATM, internet and mobile banking. India‘s banking

sector is currently valued at Rs.81 trillion (US$ 1.31 trillion). It has the potential to become the fifth

largest banking industry in the world by 2020 and the third largest by 2025, according to an industry

report. The face of Indian banking has changed over the years. Banks are now reaching out to the masses

with technology to facilitate greater ease of communication, and transactions are carried out through the

Internet and mobile devices. A bank is a financial institution that provides banking and other financial

services to their customers. A bank is generally understood as an institution which provides fundamental

banking services such as accepting deposits and providing loans. There are also nonbanking institutions

that provide certain banking services without meeting the legal definition of a bank. Banks are a subset of

the financial services industry. A banking system also referred as a system provided by the bank which

offers cash management services for customers, reporting the transactions of their accounts and

portfolios, throughout the day.

The banking system in India should not only be hassle free but it should be able to meet the new

challenges posed by the technology and any other external and internal factors. For the past three

decades, India‘s banking system has several outstanding achievements to its credit. The Banks are the

main participants of the financial system in India. The Banking sector offers several facilities and

opportunities to their customers. All the banks safeguards the money and valuables and provide loans,

*Asst.Professor in Kirti M. Doongursee College, Dadar (w), Mumbai-400028

Email ID: [email protected] Contact: +91 9702020242


Abstract

The economic reforms initiated by the Government of India about two decades ago have changed the

landscape of several sectors of the Indian economy. The Indian banking sector is no exception. This

sector is going through major changes as a consequence of economic reforms. The role of banking

industry is very important as one of the leading and mostly essential service sector. India is the largest

economy in the world having more than 120 crore population. Today in India the service sector is

contributing half of the Indian GDP and the banking is most popular service sector in India. The

significant role of banking industry is essential to speed up the social economic development. Banks

plays an important role in the economic development of developing countries. Economic development

involves investment in various sectors of the economy. The economic reforms have also generated new

and powerful customers (huge Indian middle class) and new mix of players (public sector units, private

banks, and foreign banks). The emerging competition has generated new expectations from the existing

and the new customers. There is an urgent need to introduce new products. Existing products need to

be delivered in an innovative and cost-effective way by taking full advantage of emerging technologies.

The biggest opportunity for the Indian banking system today is the Indian consumer. Demographic

shifts in terms of income levels and cultural shifts in terms of lifestyle aspirations are changing the

profile of the Indian consumer. The Indian consumer now seeks to fulfil his lifestyle aspirations at a

younger age with an optimal combination of equity and debt to finance consumption and asset

creation. This is leading to a growing demand for competitive, sophisticated retail banking services.

This paper explains the changing banking scenario, the impact of economic reforms and analyses the

challenges and opportunities of national and commercial banks.


credit, and payment services, such as checking accounts, money orders, and cashier‘s cheques. The banks

also offer investment and insurance products. As a variety of models for cooperation and integration

among finance industries have emerged, some of the traditional distinctions between banks, insurance

companies, and securities firms have diminished. In spite of these changes, banks continue to maintain

and perform their primary role-accepting deposits and lending funds from these deposits.Before the

establishment of banks, the financial activities were handled by money lenders and individuals. At that

time the interest rates were very high. Again there were no security of public savings and no uniformity

regarding loans. So as to overcome such problems the organized banking sector was established, which

was fully regulated by the government. The organized banking sector works within the financial system

to provide loans, accept deposits and provide other services to their customers. The following functions

of the bank explain the need of the bank and its importance:

• To provide the security to the savings of customers.

• To control the supply of money and credit

• To encourage public confidence in the working of the financial system, increase savings speedily and

efficiently.

• To avoid focus of financial powers in the hands of a few individuals and institutions.

• To set equal norms and conditions (i.e. rate of interest, period of lending etc.) to all types of Customers.

What is Bank?

A bank is a financial institution which deals with deposits and advances and other related services. It

receives money from those who want to save in the form of deposits and it lends money to those who

need it.

Growth of Banking Sector in India:

A bank is a financial institution which deals with deposits and advances and other related services. It

receives money from those who want to save in the form of deposits and it lends money to those who

need it.

A banking revolution occurred in the country during the post-nationalization era. The commercial banks,

especially public sector banks, have drastically changed from their traditional money dealing business to

innovative banking and sub-served their operations to the needs of nation-building activities and socio-

economic upliftment of the Indian masses.

It is rightly said that Indian banking has changed from class-banking to mass-banking or social banking.

There has been a marked diversification of banking business from traditional to non-traditional and even

to non-financial areas of operation during the last two decades.

In recent years, there has been a conscious reorientation of banking policy towards the attainment of

social goals.

The following have been the major shifts in the banking policy of the country:

Urban to rural orientation

Profit motive to mass banking

Class banking to mass banking

Big customers to small customers

Traditional banking to innovative banking

Short-term finance to development finance

Security based lending to purpose oriented lending

Creditworthiness of the borrower to the purpose of borrowing and

Self-interest to social perspectives.

Indian banking has become development oriented. There are both quantitative and qualitative dimensions

to the progressive changes that have taken place in our banking industry, ushering in a new era in the


county's economic progress.

Nationalization of Indian Banks:

After independence the Government of India (GOI) adopted planned economic development for the

country (India). Accordingly, five year plans came into existence since 1951. This economic planning

basically aimed at social ownership of the means of production. However, commercial banks were in the

private sector those days. In 1950-51 there were 430 commercial banks. The Government of India had

some social objectives of planning. These commercial banks failed helping the government in attaining

these objectives. Thus, the government decided to nationalize 14 major commercial banks on 19th July,

1969. All commercial banks with a deposit base over Rs.50Crores were nationalized. It was considered

that banks were controlled by business houses and thus failed in catering to the credit needs of poor

sections such as cottage industry, village industry, farmers, craft men, etc. The second dose of

nationalization came in April 1980 when banks were nationalized.

Banking Sector Reforms:

Since nationalization of banks in 1969, the banking sector had been dominated by the public

sector. There was financial repression, role of technology was limited, no risk management etc. This

resulted in low profitability and poor asset quality. The country was caught in deep economic crises. The

Government decided to introduce comprehensive economic reforms. Banking sector reforms were part of

this package. In august 1991, the Government appointed a committee on financial system under the

chairmanship of M. Narasimhan.

Narsimham Committee Report

To restore the financial health of commercial banks and to make their functioning efficient and

profitable, the Government of India appointed a committee called 'The Committee on Financed System'

under the chairmanship of Sri M. Narasimham, ex-Governor of Reserve Bank of India which made

recommendations in November 1991. The Committee laid down a blue print of financial sector reforms,

recognized that a vibrant and competitive financial system was central to the wide ranging structural

reforms. In order to ensure that the financial system operates on the basis of operational flexibility and

functional autonomy, with a view to enhance efficiency, productivity and profitability, the Committee

recommended a series of measures aimed at changes according greater flexibility to bank operations,

especially in Pointing out statutory stipulations, directed credit program, improving asset quality,

institution of prudential norm, greater disclosures, better housekeeping, in terms of accounting practices.

In the words of BimalJalan, ex-Governor of RBI, "the central bank is a set of prudential norm that are

aimed at imparting strength to the financial institutions, and inducing greater accountability and market

discipline. The norms include not only capital adequacy, asset classifications and provisioning but also

accounting standards, exposure and disclosure norms and guidelines for investment, risk management

and asset liability management." These recommendations are a landmark in the evolution of banking

system from a highly regulated to more market-oriented system. The reforms introduced since 1992-93

breathed a fresh air in the banking sector. Deregulation and liberalization encouraged banks to go in for

innovative measures, develop business and earn profits. These reforms, the Narasimham Committee-I

felt, will improve the solvency, health and efficiency of institutions. The measures were aimed at

i. ensuring a degree of operational flexibility,

ii. internal 'autonomy for public sector banks in their decision-making process, and

iii. greater degree of professionalism in banking operations


Recommendations of Narasimham Committee:

The main recommendations of the Committee were:-

1. Reduction of Statutory Liquidity Ratio (SLR) to 25 percent over a period of five years

2. Progressive reduction in Cash Reserve Ratio (CRR)80

3. Phasing out of directed credit programmes and redefinition of the priority sector

4. Deregulation of interest rates so as to reflect emerging market conditions I

5. Stipulation of minimum capital adequacy ratio of percent to risk weighted assets by March 1993, 8

percent by March 1996, and 8 percent by those banks having international operations by March 1994.

6. Adoption of uniform accounting practices in regard to income recognition, asset classification and

provisioning against bad and doubtful debts

7. Imparting transparency to bank balance sheets and making more disclosures

8. Setting up of special tribunals to speed up the process of recovery of loans

9. Setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of their bad and

doubtful advances at a discount

10.Restructuring of the banking system, so as to have 3 or 4 large banks, which could become

international in character, 8 to 10 national banks and local banks confined to specific regions. Rural

banks, including Regional Rural Banks (R.RBs), confined to rural areas.

11.Setting up one or more rural banking subsidiaries by Public Sector Banks

12.Permitting RRBs to engage in all types of banking business

13.Abolition of branch licensing

14.Liberalizing the policy with regard to allowing foreign banks to open offices in India.

15. Rationalization of foreign operations of Indian banks

16.Giving freedom to individual banks to recruit officers

17. Inspection by supervisory authorities based essentially on the internal audit and inspection reports.

18.Ending duality of control over banking system by Banking Division and RBI

19. A separate authority for supervision of banks and financial institutions which would be a semi-

autonomous body under RBI 81

20.Revised procedure for selection of Chief Executives and Directors of Boards of public sector banks

21.Obtaining resources from the market on competitive terms by DFIs

22.Speedy liberalization of capital market

23.Supervision of merchant banks, mutual funds, leasing companies etc., by a separate agency to be set

up by RBI and enactment of a separate legislation providing appropriate legal framework for mutual

funds and laying down prudential norms for these institutions, etc.

Several recommendations have been accepted and are being implemented in a phased manner. Among

these are the reductions SLR/CRR, adoption of prudential norms for asset classification and provisions,

introduction of capital adequacy norms, and deregulation of most of the interest rates, allowing entry to

new entrants in private sector banking sector, etc.

Private Sector Banks in India:

The private-sector banks in India represent part of the Indian banking sector that is made up of both

private and public sector banks. The "private-sector banks" are banks where greater parts of stake or

equity are held by the private shareholders and not by government.

Banking in India has been dominated by public sector banks since the 1969 when all major banks were

nationalized by the Indian government. However, since liberalization in government banking policy in

the 1990s, old and new private sector banks have re-emerged. They have grown faster & bigger over the

two decades since liberalization using the latest technology, providing contemporary innovations and

monetary tools and techniques.


List of a few private sector banks:

City Union Bank 1909

Dhanlaxmi Bank 1927

Federal Bank 1931

ING Vysya Bank Merged with kotak Mahindra bank 1930

Axis Bank (earlier UTI Bank) 1994

Bank of Punjab (actually an old generation private bank since it was not founded under post-1993 new

bank licensing regime) 1989

ICICI Bank (previously ICICI and then both merged;total merger SCICI+ICICI+ICICI Bank Ltd)

1996

IndusInd Bank 1994

Kotak Mahindra Bank 2003

Yes Bank 2005

HDFC bank 1994

Bandhan bank 2015

IDFC Bank 2015

FOREIGN BANKS THAT OPERATE IN INDIA:

Below are the list of 44 foreign banks in India:

Australian banks

1. Australia and New Zealand Banking Group

2. Commonwealth Bank of Australia

3. National Australia Bank

4. Westpac Banking Corporation

Bahraini bank

1. Bank of Bahrain and Kuwait

Bangladeshi banks

1. AB Bank

2. Sonali Bank

Belgian bank

1. Antwerp Diamond Bank

Canadian bank

1. Bank of Nova Scotia

Chinese bank

1. Industrial & Commercial Bank of China

French banks

1. BNP Paribas

2. Credit Agricole

3. Societe General

German banks

1. Deutsche Bank


Hong Kong bank

1. HSBC

Indonesian bank

1. Bank Internasional Indonesia

Japanese banks

1. Mizuho Corporate Bank

2. Sumitomo Mitsui Banking

3. Bank of Tokyo-Mitsubishi

Mauritian bank

1. State Bank of Mauritius

Dutch bank

1. Rabobank

Qatari bank

1. Doha bank

Russian banks

1. Sberbank

2. VTB

Omani bank

1. HSBC Bank Oman

Scottish bank

1. Royal Bank of Scotland

Singaporean banks

1. DBS Bank

2. United Overseas Bank

South African bank

1. FirstRand Bank

South Korean banks

1. Shinhan Bank

2. Woori Bank

Sri Lankan bank

1. Bank of Ceylon

Swiss banks

1. Credit Suisse

2. UBS AG


Taiwanese bank

1. Chinatrust Commercial Bank

Thai bank

1. Krung Thai Bank

UAE banks

1. Abu Dhabi Commercial Bank

2. Mashreq Bank

UK banks

1. Barclays Bank

2. Standard Chartered Bank

US banks

1. American Express

2. Bank of America

3. Citibank

4. J.P. Morgan Chase Bank

CONCLUSION:

It may be pointed out that the banking sector reform is certainly not a one-time affair. It has evolutionary

elements and follows a progression of being and becoming. Form this point, Indian experience of

restructuring banking sector has been reasonably a successful one. There was no major banking crisis and

the reform measures were implemented successfully since 1992. Some expressed the fear that the reforms

will sound a blow to social banking. The Government did not accept the Narasimham Committee-I

recommendation that advances to priority sector should be brought down from 40 per cent to 10 per cent.

The Banks continued to be directed to lend a minimum of 18 per cent of total banks credit to agriculture

sector.

As banks are expanding in to virtual banking, supervision and audit will have to be strengthened. Banks

will have to pay greater attention to fool proof security arrangements and systems to safeguard against

frauds.

REFERENCES:

India. Committee on the Financial System; M. Narasimham (1992). Narasimham Committee

report on the financial system, 1991. Standard Book Co. Retrieved 23 February 2011.

"INDIA’S ECONOMIC REFORMS: AN APPRAISAL". Montek Singh Ahluwalia. 26 August

1999. Retrieved 23 February 2011.

"Reforms have been taken up in right earnest: Narasimhan". Expressindia.com. 31 October 1998.

Retrieved 2011-02-19.

www.wikipedia.org – Banking In India , Narasimham Committee on Banking Sector Reforms


http://www.wikipedia.org/

Goals of Sustainable Development: A Case Study of India

* Kadam Asha R.

Objectives of the study.

1) To understand the concept of Sustainable development.

2) To understand the environmental problems and its impact on human being.

3) To understand the socio-economic problems and its impact on economic development

4) Goals of sustainable development to solve the environmental, socio-economic problem.

What is the Sustainable development?

There are different origins and definition of the term sustainable development but in 1987 world

commission on environmental and developments reports called, the brunt land report is by for the best

and is now one of the most widely recognized definitions.

Definition:-

“Sustainable development is development that meets the needs of present without compromising the

ability of future generation to meet their own needs”.

It contains within it two key concepts.

• The concept of needs in particular the essential needs of the world poor, to which overriding

priority should be given and.

2) The idea of limitation imposed by the state of technology and social organization on the

environmental ability to meet present and future needs.

1 .Air Pollution: is caused by various gases and toxins released by industries and factories and

combustion of fossil fuels. Which lead various healths hazardous to human health. E. g Respiratory

disease.

2. Global Warming: is the result of emission of Greenhouse gases in to atmosphere. Which leads to

rising temperatures of the oceans and the earth’ surface causing melting of polar ice caps, rise in sea

levels and also unnatural patterns of precipitation such as flash floods, excessive snow or desertification.

*Asst.Professor in Geography, Chetana’s H.S.College of Commerce and Economics, Bandra (E),

Mumbai – 51. Email Id: [email protected], Mobile: 9892677494/ 7506870308


Abstract:

The concept of the sustainable development is concerned with environmental problem and the

socio-economic problem. Such as Global warming, Depletion of ozone layer, Climate change,

Depletion of ground water level, Increase in pollution (Air, Water, Sound) generation of waste

including plastics, Electronic, Biomedical, Solid which lead to degradation of environmental. The

sustainable development is directly related with the well being of the humanity and protection of the

mother earth. There is innumerable number of debates, new researches on dealing with the socio-

economic and environmental problem, which has contributed to the idea of sustainable development.


3. Reduce soil fertility: Intensive agriculture practiced to produce food, damages the soil fertility

through use of chemical fertilizer, pesticides and insecticides.

4. Natural Resource Depletion: Rapid use of Fossil fuel due to advance technology and Development in

modes of transport, which lead to depletion of energy resource

5. Waste Disposal: The over consumption of resources are creating a global crisis of waste disposal.

Developed countries are responsible for producing an excessive amount of waste or garbage and dumping

their waste in the oceans and, less developed countries. Waste disposal has tremendous health hazards

associated with it. Plastic, fast food, packaging and cheap electronic wastes threaten the well being of

human.

6. Climate Change: It occurs due to rise in global warming which occurs due to increase in temperature

of atmosphere by burning of fossil fuels and release of harmful gases by industries. Climate change has

various harmful effects but not limited to melting of polar ice, change in seasons, occurrence of new

diseases, frequent occurrence of floods and change in overall weather scenario.

7. Loss of Biodiversity: Human activity is leading to the extinction of species and habitats and loss of

bio-diversity. Eco systems, which took millions of years to perfect, are in danger when any species

population is lost. Another example is the destruction of coral reefs in the various oceans, which support

the rich marine life.

8. Deforestation: Our forests are natural sinks of carbon dioxide and produce fresh oxygen as well as

helps in regulating temperature and rainfall. At present forests cover 30% of the land but every year tree

cover is lost amounting to the country of Panama due to growing population demand for more food,

shelter and cloth. Deforestation simply means clearing of green cover and makes that land available for

residential, industrial or commercial purpose.

9. Ocean Acidification: It is a direct impact of excessive production of CO2. 25% of CO2 produced by

humans. The ocean acidity has increased by the last 250 years but by 2100, it may shoot up by 150%. The

main impact is disturbing aquatic ecosystem

10. Ozone Layer Depletion: Depletion of the crucial Ozone layer of the atmosphere is caused by

Chloro-floro carbons (CFC’s). Once these toxic gases reach the upper atmosphere, they cause a hole in

the ozone layer, the biggest of which is above the Antarctic. The CFC’s are banned in many industries

and consumer products. Ozone layer is valuable because it prevents harmful UV radiation from reaching

the earth.

11. Acid Rain: Acid rain occurs due to the presence of certain pollutants in the atmosphere. Acid rain

can be caused due to combustion of fossil fuels or eruption of volcanoes or rotting vegetation which

release sulfur dioxide and nitrogen oxides into the atmosphere. Acid rain that can have serious effect on

human health, wildlife and aquatic species.

12. Water Pollution: Clean drinking water is becoming a rare today. Industrial development is filling our

rivers seas and oceans with toxic pollutants which are a major threat to human health& aquatic

ecosystem.

Poverty: Currently measured as people living on less than $1.25 per day. The poorest 40% of the world

population account for 5% of global income. The richest 20% account for three-quarters of the world

income. According to UNICEF 22000 children die each day due to poverty and they die quietly in some

of poorest villages on earth for removed from the scrutiny and the consciences of the world. Being week

and week in life makes these dying Multitudes even more invisible in death.


Unemployment:- The global employment gap which measures the numbers of jobs lost since the start of

the crisis currently stands at 61 million, If the new labour market entrants over the next five year are

taken into account, An additional 280 million jobs need to be create by 2019 to close the global

employment gap caused by crisis.

Hunger & Malnutrition: There are 79.5million under nourished people in the world today. That means

one in nine people do not get enough food to be healthy and active life, Hunger and malnutrition are in

fact the number one risk to health worldwide greater than Aids, Malaria & T.B. Some 795 million

people in the world do not have enough food to lead a healthy active life, that about one in nine people on

earth.

• The most majority of the world’s hungry people live in developing countries where 12.9% of the

population is undernourished.

• Two third of the total population lives in Asian continental. The percentage in south Asia has

fallen in recent years but in western Asia it has increase slightly.

GOALS OF SUSTAINABLE DEVELOPMENT:-

The main goals of sustainable development are that conservation of natural resources for fulfillment

of the basic needs to sustain future generation. There are following goals of sustainable development.-

• NO Poverty (Poverty eradication targets): By 2030, eradicate extreme poverty for all people

everywhere. Reduce at least by half the proportion of men, women and children of all ages living

in poverty in all its dimensions according to national definitions Ensure that all men and women,

in particular the poor and the vulnerable, have equal rights to economic resources, as well as

access to basic services, ownership and control over land and other forms of property, natural

resources, and financial services.

e.g.1) Govt of India provides free shelter to BPL People under the Indira Aawass Yojna.

2) Govt of India also provides food grain at low cost to BPL People.

• Zero Hunger: End hunger and ensure access by all people, in particular the poor and people in

vulnerable situations, including infants, to safe, nutritious and sufficient food all year round.

Indian targets Indian Govt. also trying for Zero Hunger.

Example- 1) PDS (Public distribution System,)

2) ICDS (1975) Integrated child development scheme.

3) Mid-day-meal scheme.

4) Food security act 2013-14.

• Good Health and Well-Being: National Sustainable Development Strategies (NSDS) targets: By

2030, reduce the global maternal mortality ratio to less than 70 per 100,000 live births. All

countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and

under-5 mortality to at least as low as 25 per 1,000 live births. End the epidemics of AIDS, TB,

malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other

communicable disease

India also trying for Good health and well being-

Swach bharat mission.

Details of rural health care system.

• Quality Education: Ensure that all girls and boys complete free, equitable and quality primary

and secondary education leading to relevant and effective learning outcomes. Substantially

increase the number of youth and adults who have relevant skills, including technical and

vocational skills, for employment, decent jobs and entrepreneurship. Indian target for quality

education:


Right to education act

Sakshar bharat abhiyan

Sarva shikshan abhiyan.

• Clean Water and Sanitation: Achieve universal and equitable access to safe and affordable

drinking water for all. Achieve access to adequate and equitable sanitation and hygiene for all and

end open defecation, paying special attention to the needs of women and girls and those in

vulnerable situations

Indian Govt also working for cleans water and sanitation.

National rural drinking water program.

Nirmal bharat abhiyan.

Swach bharat mission.

• Affordable and Clean Energy: Ensure universal access to affordable, reliable and modern

energy services. Increase substantially the share of renewable energy in the global energy mix.

Double the global rate of improvement in energy efficiency

India also working for affordable and clean energy. - Indian government trying to increase

renewable energy. Example-

Solar Energy.

Wind Energy.

Nuclear power

• Reduced Inequalities: Progressively achieve and sustain income growth of the bottom 40 % of

the population at a rate higher than the national average. Empower and promote the social,

economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin,

religion or economic or other status. Facilitate orderly, safe, regular and responsible migration

and mobility of people, including through the implementation of planned and well-managed

migration policies. Implement the principle of special and differential treatment for

developing countries, in particular least developed countries, in accordance with World Trade

Organization agreements.

• Sustainable Cities and Communities: Ensure access for all too adequate, safe and affordable

housing and basic services and upgrade slums. Provide access to safe, affordable, accessible and

sustainable transport systems for all, improving road safety, notably by expanding public

transport, with special attention to the needs of those in vulnerable situations, women, children,

persons with disabilities and older persons

India also working for sustainable cities and communities –

Smart cities Programme.

Sansad Adarsh Gram Yojana.

JNNURM.

• Responsible Consumption and Production: Implement the 10-year framework of programmes

on sustainable consumption and production, all countries taking action, with developed countries

taking the lead, taking into account the development and capabilities of developing countries.

Achieve the sustainable management and efficient use of natural resources. Halve per capita

global food waste at the retail and consumer levels and reduce food losses along production and

supply chains, including post-harvest losses. Substantially reduce waste generation through

prevention, reduction, recycling and reuse.

• Climate Action: Integrate climate change measures into national policies, strategies and

planning. Improve education, awareness-raising and human and institutional capacity on climate

change mitigation, adaptation, impact reduction and early warning.


• Life below Water: prevent and significantly reduce marine pollution of all kinds, in particular

from land-based activities, including marine debris and nutrient pollution.Sustainably manage and

protect marine and coastal ecosystems to avoid significant adverse impacts, including by

strengthening their resilience, and take action for their restoration in order to achieve healthy and

productive oceans. Minimize and address the impacts of ocean acidification, including through

enhanced scientific cooperation at all levels.

• Life on Land: Ensure the conservation, restoration and sustainable use of terrestrial and inland

freshwater ecosystems and their services, in particular forests, wetlands, mountains and dry land,

in line with obligations under international agreements. Take urgent and significant action to

reduce the degradation of natural habitats, halt the loss of biodiversity and, by 2020, protect and

prevent the extinction of threatened species.

• Gender Equality: End all forms of discrimination against all women and girls everywhere.

Eliminate all forms of violence against all women and girls in the public and private spheres,

including trafficking and sexual and other types of exploitation

Eliminate all harmful practices, such as child, early and forced marriage and female genital

mutilation. Adopt and strengthen sound policies and enforceable legislation for the promotion of

gender equality and the empowerment of all women and girls at all levels.

Conclusion: Sustainable development is the organizing principle for sustaining finite resources

necessary to provide for the need of future generations of life on the planet.

It is a process the envisions a desirable future state for human societies in which living condition

and resources- use continue to meet human needs without undermine the “integrity, stability and

beauty”, of natural biotic systems. Sustainability as the practices of reserving resources for future

generation without any harm to the nature and other components of it. Sustainable development

also ties together concern for the carrying capacity of natural systems with the social and

economic challenges faced by humanity. There is an additional focus on the present generation’s

responsibility to regenerate, maintain and improve planetary resource for use by future generation.

Reference:

• Environmental studies – Erach Bharucha ( UGC publication)

• Dr. Ritu Dewan (2015) Journal on sustainable regional development in India, challenges and

opportunities, Archers and Elevators Publishing

• Journal of United Nation (2014)

• Annual Report of Kyoto Protocol.(2014)

• www.Jnnurm.nic.in

• www.unfcc.int

• www.eai.in

• www.mnre.gov.in

• www.rural.nic.in

• www.unep.int


http://www.jnnurm.nic.in/

http://www.unfcc.int/

http://www.eai.in/

http://www.mnre.gov.in/

http://www.rural.nic.in/

http://www.unep.int/

FDI Prospectus and Issues Special Reference to the Power Sectors of India

*Netawate, Ravindra S.

Introduction:

India is a developing country , it looks towards the development, due to lack of technology and the

finance India could not as achieve the self dependent nation. After the second world war every country

became interdependent , without assistance o0r cooperation development is not possible. The growth rate

of India never increased above 8.5% . To maintained the proper balance of payment , FDI is must. After

1991 when the prime minister was Dr. P.V Narsimharao. India framed the FDI Policy it , gave the 49%

FDI in the initial stages then the GOVT Of India increased it up to 74% . Later on govt. raised the

limitation up to 100% FDI in several sector. India allowed FDI in service sector, in Telecommunication

sector, Retail sector , mining sector. Electronic sector, Power sector. In construction, petroleum and

natural gas Etc. . Japan , Mauritius, South Korea. UK, Germany, Saudi Arabia and Singapore are the

leading investors in India.

Although the states like Maharashtra, Gujarat, Tamilnadu, Karnataka, Delhi, Pondicherry, Daman Diu

have attracted more than 80% FDI during the year 1991 to 2001. The large share of FDI found in

Karnatka, Tamilnadu, Gujrat and Maharashtra. A notable trend is observed during the post liberalization

period is that most MNC while raising their share of foreign equity to majority level , indicate a tendency

to avoid the stock market . TNC are side stepping the stock market and they sell off existing unit to locals

and promote wholly own subsidiaries of the –parent company . Another notable trends is that in India is

catering to the needs of upper middle and affluent classes as a result of which there is utter neglect of the

wage goods sector . MNC concentrating In to the production of soft drinks, production of potato chips,

bakery product, wafers, food processing.

As far as the power sector is concerned the GOVT. of India has allowed 100% FDi. India”s size of the

market is very huge, day by day the population is increasing, the industrial sector is increasing rapidly.

There is a need of sufficient power supply, the existing power project is not adequate to meet the needs of

several sector . Therefore power sector is the backbone of the growth. India has allowed hundred percent

FDI in this sector. Adani Power LTd. , Luminous power technology. Dabhol power co. ltd. , PTC India

ltd., Singapore utilities ltd. Are the leading power industries which is increasing the power capacity.

Review of Literature:

According to Prof. Chandan Chakro borty and Petter Munnen Kemp “FDJ and its Economic Effect In

India” The growth implication in FDI by subjecting industry specific FDI and output to casualty test”

*Asst.Professor in Commerce, D.G.RUPAREL COLLEGE OF ARTS, SCIENCE & COMMERCE,

Opposite Matunga Road, Near Western Railway Station, Mahim, Mumbai – 400016.


Abstract:

From the present study, it came to know that FDI capturing the Indian market rapidly, the

consequences of it is that domestic power companies are losing its identities. On the other side FDI is

essential because , country wants sound development, in regional sectors there for FDI is a inevitable

part for India , though there is some unsatisfactory impact on business but FDI is crucial for the

development of the nation. In short we can say that FDI is must for the development of Nation.

According to IMF, FDI is defined as investment that is made to acquire a lasting interest in an enterprise

operating an economy other than that of the investors . The investors purpose being to have an efficient

voice in management of the enterprise

According to United Nations Report, The foreign owned firm would make an investment in the host

country only if it poses some compensating advantages which allows it to compete on an equal terms

with indigenous firms. This statement is enough to prove that how The FDI is essential in India .

According to World Bank, Foreign direct investment assist in increasing the income that is generated

through revenues realized through taxation it plays crucial role in the context of rise in productivity.

According to Jeffry Graham and R Barry Spaulding, A company from one country making a physical

investment in building a factory in another country The direct investment in building machinery and

equipment is in contrast with making a portfolio investment which is considered an indirect investment.

Rational Of The Study:

In this globalization business world , if we want remain in the long terms , it is necessary to permit the

FDI in developing country like as India . Power sector is one of the leading sector which is independent

but several sectors are depended on power sector. Day by day the population is increasing, it

consumption capacity is also increasing but the power sources are very meager, Industrial sector is also

rapidly developing and the power supply capacity is not enough for increasing the productivity and

production. Agriculture sector can not be disconsidered it need of power. As far as India’s power

capacity is concerned it is very small as compared to other country, there fore it is the need to aloe FDI in

Power sector . many private firms are ready to invest in power sector.

Objectives of the Study:

1) To understand the Concepts of foreign direct investment

2) To study the problems of FDI in India.

3) To study the impact of FDI on Indian firms .

4) To study impact of FDI on Indian economy.

Hypothesis:

1) H1: FDI has Negative impact on Indian firms.

2) H1: FDI is facing problems in Indian context.

3) H1 : FDI has a positive impact on Indian economy.

The main hypothesis of the study is that FDI has a positive impact on Indian economy.

The alternative hypothesis is Indian power sector is not able to produce power for the development of

various sector.

Research Methodology -

The present study is based on the descriptive research methodology and secondary data which is collected

from the references,articles journals and websites.

Collection of Data -

For the above research paper the secondary data is collected from the references related to FDI, some of

the information is collected from the journals, published articles and government publications.


DATA Analysis -

Power Consumption in Different Sectors

Sectors Power Consumption % Industry 39 Agriculture 18 Domestic 12 Commercial 10 Railways 15 Others 6

From the above table it is clear that increasing the capacity of power is the need of the nation . from 2000

to 2012 the Indian government has taken the necessary steps for increasing the power capacity. We

allowed various countries for investing in power sector. Mauritius has invested large amount in Indian

power sector , Singapore and U.S.A. have contributed in this sector satisfactory investment. From the

above pie chart it is cleared that the power supply is required to different sectors, as the table is shown.

39% power supply is needed to industrial sector ,24%for the domestic purpose and for Traction and

railway 23% power supply is used .For agriculture 19% were as for commercial only 10% and for other

purpose only 6% . power supply is used.

As per the table is shown that there is 36265.99 crores investment is received in power sector

As per the domestic power supply is produced which can not fulfill the need of various sectors. Still

there is 8.5% deficit of power supply is remained .

State wise FDI is seen it is cleared that large FDI is invested in the states of Maharashtra ( Rs.7194.05 cr.)

and lower investment is in the states of Karnatka (Rs. 1589.79cr.)

Prospectus of FDI-

1) FDI has given the sound shape to the Indian economy, by investing capital in various sectors

especially in power sector 4.17% which is a good sign of development.

2) The employment rate is increasing rapidly in twenty five power supply centers are running in

India on FDI, it reducing the unemployment problem.


Power Consumption %

Industry

Agriculture

Domestic

Commercial

Railways

Others

39

1812

10

15 6

3) Due to regular power supply the industries and other sectors are increasing its additional capacity

of production, which increased the productivity of the different sectors , it is good fortune of

development.

4) The domestic power supply was not enough to meet the needs of various sectors , many times the

government started the load shedding / power off more than twelve hours in village areas. But

due to FDI in power sector , the problem of power off is minimize.

5) Power supply is the Engine growth of the economy , Due to FDI in this sector the growth rate is

also increased , it reached up to 6.5%

6) In power sector FDi and private companies have been permitted in this sector .,there fore there is

a tough competition in these sectors ultimately consumers of different sectors get the benefits of

pricing strategy.

7) The government of India has taken initiative for FDI , Govt. attracting the foreign investors by

allowing the concession in basic custom duty, as well as countervailing duty. Tax concession and

excise duty is reduced for the foreign investors.

8) With the FDI The Indian firms are surviving , many foreign investors collaborating with the host

companies indirectly domestic companies are developing in the Indian market.

Limitations of the Study-

1) The present capacity of the power supply is not meeting the needs of the various sectors, though

the Govt. has allowed FDI, for producing the power there is a need of fuel i.e. coal and gas India

is importing the millions of coals from the foreign countries , for additional power supply the coal

and gas is not sufficient ultimately the FDI in this sector would come in the trouble. Its impact

would come on allied sector.

2) If sufficient sources are not available then enough power would not be generated, in future these

foreign investors postpone their investment , it will be the negative impact on the Indian

economy.

3) Power production is depended on water resources , the water capacity is reducing day by day due

to degradations of forest sufficient rain fall is not , therefore many power stations are on the verge

of closing down.

4) While producing the power , there is chemicals are used in the water , the adverse impact of this is

that many marine lives are lost. The recent study shows that millions of fishes are died in the sea

, it spread the odors due to this different types of diseases are spread in the society.

5) Power generation is creating problem to the nature , pollution is increased in nearby areas,

6) Employment problem of fisheries arising due to power generation , the production capacity of

fishes are reducing , the fisherman could get the sufficient quantity of fishes , there is a chances of

loosing their livelihood .

7) FDI creating extra power , the foreign companies use excess capacities , its impact on the land ,

there is a chances of earthquake , or natural calamities.

8) FDI is harmful to the domestic business, the domestic businessmen can’t compete with the

foreign investors.

9) Son of soil concept still remained in the residents of native place therefore FDI comes into

dilemma. Dabhol power plant and the Enron power plant is the best example of it.

Political interference is one of the big problems in the development of FDI several occasions the

changes in policies of the govt. cause the problems in the survival of foreign companies.

10) Law and order hampers to the flow of FDI in the nation, many foreign industries avoid investment

in India due to shadow of terrorism. Security problems is always in forefront of the investors.


Findings -

1) The FDI invest their capital in fast moving goods it couldn’t bring the sound development in

the host countries, These companies focus on soft drinks, fast foods, fashionable product etc.

2) As per the study , it proved that FDI is found in the Urban area rather than rural area , it has a

lack of rural development. The real objectives left behind.

3) FDI has entered in several sectors the small scale industries are in the closing down situation,

These sector’s employee becomes unemployed.

4) The FDI in power sector is a good development of economy, if we see the other side of it . It

notices that the private power supplying companies fluctuated the prices it is adverse impact

on the consumerism.

Suggestions-:

1) The govt. should frame the long terms policies for FDI and particularly for power sector.

2) Govt. has to be attracted to FDI there fore concessional policies in taxes and excise duty need

to be implemented.

3) Future planning is very essential for the power sector , day by day the need of power is

increasing to meet the demand strategic planning is required.

4) Power theft is increasing in several sectors , govt. should be strict and it should be regulated

by private agencies .

Conclusion -

From the present study, it came to know that FDI capturing the Indian market rapidly, the

consequences of it is that domestic power companies are losing its identities. On the other side

FDI is essential because , country wants sound development, in regional sectors there for FDI is a

inevitable part for India , though there is some unsatisfactory impact on business but FDI is

crucial for the development of the nation. In short we can say that FDI is must for the

development of Nation.

Bibliography-

“Foreign Investment In India”, Niti Bhasin, New Century Publications

“Foreign Direct Investment In India”- Problems and Prospects”, Anilkumar Thakur,

T.K.Shandilya, Deep & Deep Publications Pvt.Ltd.

“Foreign Direct Investment in Different Sectors of Indian Economy”, Dr.Deepti, Deep &

Deep Publications Pvt.Ltd.

“Journal Of Indian Marketing Association”

www.google.com


http://www.google.com/

FDI in Human Resource Development

*Manna, Mousumi

Introduction:

Modern economists in recent decades have pointed out that many Third World countries have

remained underdeveloped an account of underdevelopment of human resources. For instance, the general

masses in these countries are either illiterate or their level of education is very low, most of them are

unskilled and untrained, or their general health is very poor. Therefore, large-scale investments in human

resources are needed if physical capital available in these countries is to be exploited more fully and in a

more efficient way. It has also been observed that the development of human resources is intricately

related to the process of economic development. Both proceed together and reinforce on one another.

The study here focuses on the following aspects:

1. The indicators of Human resource development;

2. Role of Human resource development in the economic development and growth of the country;

3. Need of education for Human resource development;

4. Relevant Government Education policy;

5. Role of FDI in Human resource development.

Theodore W. Schultz has argued that investment in education enhances human capital formation.If

this is not done, production will suffer. ( Due to lack of skilled and educated labour.) But it is very difficult

to measure human resource development because human resource is not traded in the market like physical

capital. Schultz lists five types of activities which enhances the standard of living:

(1) Health facilities and services, broadly conceived to include all expenditures that affect the life

expectancy strength and stamina, and the vigour and vitality of the people;

(2) On-the-job training, including old-style apprenticeships organized by firms;

(3) Formally organized education at the elementary, secondary, and higher levels;

* Asst. Professor in English, Chetana's H. S. College of Commerce and Economics and Kusumtai

Choudhari College of Arts, Bandra(E), Mumbai-51. Email ID:[email protected]


Abstract:

Human resource development plays an important role in economic development. The effective use of

physical capital itself is dependent upon human resources. This is due to the reason that if there is

underinvestment in human resources the rate at which additional physical capital can be productively

utilized will be limited since technical, professional and administrative people are required to make

effective use of material resources. Many statistical investigations carried out in various countries have

shown that the output increased at a much higher rate which can be explained by an increase in

physical in puts like labour and physical capital. The reason is that the quality of human beings as a

productive source has been consistently improving due to improvement in Education and skills,

availability of health services, etc.

Therefore, it is an attempt in this essay to find out the multiple complexities faced by the society and

Human education which can be somewhat tackled by inviting certain policies and strategies, like the

FDI. In this respect Government of India has already initiated certain policies.

(The study is based on secondary sources: Books, Journals, Newspaper reports, Articles from Web

sites)


(4) Study programs for adults that are not organized by firms including extension programmes notably

in agriculture;

(5) Migration of individuals and families to adjust to changing job opportunities. 2

Frederick Harbison and Charles A. Myer divide indicators of human resource development into two

general categories;

(1) Those which measure a country’s stock of human capital;

(2) Those which measure the gross or net additions to this stock, or the rate of human capital over a specified

period.

They consider the following two indicators more useful for international comparisons:

1. Levels of educational attainment. The number of persons in the population who have completed

the following levels of education: first (primary or elementary), second (secondary), and third (higher

education). The last two are particularly important in indicating the stock of high-level manpower.( It

is found that 25-27% of technical students passing out of the many Engineering colleges in India are

employable.)

2. The number of persons, in relation to the population or labour force, who are in high-level

occupations. Especially the numbers in selected strategic occupational groups: scientists, engineers,

managers, teachers all levels), doctors, scientific and engineering technicians, nurses and medical

assistants, and persons in the foreman-skilled worker category.3

The earlier economists also recognized this role of Human resources and explicitly included Human

beings and their acquired abilities and skills, as a component of capital. They opine that Human beings

should be regarded as a resource for production purposes for these reasons: “(a) the cost of

rearing and educating human beings is a real cost; (b) the product of the labour adds to the national

wealth; (c) an expenditure on a human being that ncreases this product will, ceteris paribus, increase

national wealth.”4

Need of Human Resource Development:

As noted above investments in education promote economic growth. Various studies have been

conducted by Economists to assess the contribution of education to economic growth of a country.

Education and skill training result directly in human resource development in the following manner:

Education and economic growth:

(1) It helps in creating a more productive labour force and endowing it with increased knowledge and

skills;

(2) It helps in providing widespread employment and income-earning opportunities for teachers, school

and construction workers, textbook and paper printers, school uniform manufacturers, etc.;

(3) It helps in creating a class of educated leaders to fill vacancies left by departing expatriates or

otherwise vacant positions in governmental services, public corporations, private businesses, and

professions; and

(4) It helps in providing basic skills and encourages modern attitudes in the diverse segments of the

population.5

Education and Reduction in Income Inequalities:

Most of the third world countries have launched upon programs of universal education in the hope

that they will improve the human capabilities of the poor people and enable them to increase their family

earnings. In short, education is seen as a great egalitarian measure which would help in improving the

human resources in general on the one hand and on the other would enable the less privileged and poor

classes of people to improve their economic lot.


Education and Rural Development:

By widening the horizons of knowledge of the rural people, it can enable them to overcome

ignorance and superstitions. Adoption of new agricultural techniques and new methods of production is

rendered easier if the farmers are educated. Impart of skills and attitudes will be useful in improving the

quality of family life, such as health and nutrition, home repairs and improvements, family planning and

child care, etc. Also education can help rural people in acquiring skills to set up cottage industries on

their own so that the unemployed people can be fruitfully employed in the villages themselves.

Education and Family planning:

Education helps in modernizing and revolutionizing the ways of thinking of the people.

Education serves as the best method of family planning in the long run. Also, as more and more women

get education and seek employment, the fertility rates show a tendency to decline.

Other benefits of education on the society:

A long, but nevertheless incomplete, list would be as follows:

(1) The current brim over income gains to persons other than those who have received extra

education;(Investment)

(2) The brim over income gains to subsequent generations form a better educated present generation;

(3) The supply of a expedient mechanism for discovering and refining potential talents;

(4) The convention of the skilled manpower requirements of growing economy;

(5) The stipulation of an environment that stimulates research in science and technology;

(6) The tendency to encourage lawful behavior and to promote voluntary responsibility for welfare

activities;

(7) The tendency to foster political stability by developing an informed electorate and competent

political leadership;

(8) To promote a common cultural heritage; and

(9) The enrichment of the enjoyment of leisure by widening the intellectual horizons of both the

educated and the uneducated.6

Role of on-the-job training:

On-the-job training can be modified to the learning capabilities and specific necessity of the

individuals working on particular machines. Such training increases the skill and efficiency of the

workers. Skilled people can be given advanced and specialized training to supervise and educate others.

Role of Health in Improving the Quality of Human Capital

Expenditure on health takes the form of investment in medical knowledge, in disease prevention

and in treatment and rehabilitation. Because a large number of poor living below subsistence levels in

underdeveloped countries suffer from malnutrition. The work agenda included under health care are as

follows:

(1) Expanding medical knowledge through increased basic research in the life sciences;

(2) Faster dissemination of new information and techniques to help policy maker and the public;

(3) More and better organized health facilities and manpower, including research laboratories and

medical schools, general hospitals and nursing homes, highly trained specialists and nursing aids;

(4) Improved financing of medical services; and

(5) Free medical aid to the poor and downtrodden and other poor sections of the population.

Most of the attempts in this field have been directed at measuring the contribution of education to

economic growth. Here, the list of benefits accruing from education is very large and most of these

benefits are ‘non-quantifiable.’ To measure the contribution of education in economic development, the

principal approaches adopted are the following:


(1) Determination of the relationship between expenditures on education and growth in income or in

physical capital formation over a period of time in one country:

(2) The residual approach in determining the contribution of education to gross national

product(GNP):

(3) Calculation of the rate of return from expenditures on education: and

(4) Making inter-country correlations of school enrollment ratios and GNP.

Present status of Education in India and Development ofSkilled labour:

Now, when we study the relation of Education in terms of Human resource development in India,

we find that, in India, expenditure on education is not considered as an investment in human resources,

yet in Government Plans, which are meant for promoting economic growth, education finds a specific

place. However, the proportion of public expenditure on education to GDP (Gross Domestic Product)

in India had stagnated for three decades since early 1950s.7 Even now public expenditure on education

in India is inadequate. As against the goal of 6 percent of GDP, the total expenditure was 3.2 percent of

GDP during the year 2007.8 To tackle this problem, the Eleventh Plan proposes a massive increase in

expenditure on education. The investment in the11th year plan is 16%. Around 50 percent of Eleventh

Plan outlay is for elementary education and literacy, 20 percent for secondary education and 30 per cent

for higher education (including Technical education).9 In terms of literacy, India’s attainment as

compared to several Asian countries is rather poor. According to Human Development Report 2009

adult illiteracy rate was 34 per cent in India in 1999-2007 as against 6.7 per cent in Philippines, and

2.4per cent in Argentina. Most development economists believe that the poor performance of India on

the literacy front has affected its overall development performance, despite following the National

Education Policy.

Education Policy in India:

To bring up the standard of Education and to lessen down the ill effects of unskilled labour, the

government on the basis of the recommendations made by the Education Commission (D S Kothari-

1966) announced its National Education Policy in 1968. The following are the important features of this

policy:

(1) All children up to the age of fourteen should get compulsory education. Due to widespread

poverty in the country elementary education should be free.

(2) To improve the standard of education the condition of teachers should be improved and particular

attention should be given to their salary scale.

(3) In order to meet the requirements of agriculture and industry curriculums at different levels

should be modified.

(4) Due recognition should be given to the work done in specialized institutes of scientific research.

(5) In order to bring uniformity in the character and standard of education in all the States a fifteen

years education system should be introduced. This system of education is quite often called as

10+2+3 system.

(6) For national integration, study of three languages was recommended. English and Hindi were

considered necessary for all students.

The modified policy(1992) envisages a National System of Education to bring about uniformity

in education, making adult education programmes a mass movement, providing universal access,

retention and quality in elementary education, special emphasis on education of girls, establishment of

pace-setting schools like Navodaya Vidyalayas in each district, vocationalisation of secondary

education, starting more Open Universities in the States, strengthening of the All India Council of

Technical Education (AICTE), encouraging sports, physical education, etc.

Right of Children to Free and Compulsory Education Act, 2009

The Parliament passed the Constitutional 80th Amendment Act, 2002 to make elementary

education a fundamental right for children in the age-group 6-14 years. The right of children to Free and

Compulsory Education Act,2009 to provide for free and compulsory education for all children of the age


6 to 14 years, was published in the Gazette of India on August 27, 2009 and has the salient feature –

Every child of the age 6-14 years shall have a right to free and compulsory education in a neighborhood

school till completion of elementary education.10 The following schemes were adopted:

Elementary and Secondary Education Schemes:

(1) Sarva Shiksha Abhiyan (SSA): The aim of SSA is to provide useful and relevant elementary

education for all children in the 6-14 age group by 2010.( Extendable)

(2) Rashtriya Madhyamik Shiksha Abhiyan(RSMA): The objectives of the scheme are to achieve an

enrolment ratio of 75 per cent for classes IX-X within five years by providing a secondary school

within reasonable distance of every habitation. Universal access to secondary level education by

2017, i.e. by the end of Twelfth Five year Plan and universal retention( maintenance) by 2020.

(3) National Programme of Midday Meals in Schools: With a view to enhancing enrolment, retention

and attendance and simultaneously improving nutritional levels among children, the MDM (mid day

meals) programme was launched as a centrally sponsored scheme on August 15, 1995, initially in

2,408 blocks of the country. In the Union Budget 2007-08, the Finance Minister extended the MDM

scheme to cover children in upper primary classes in 3,427 educationally backward blocks.

(4) Kasturba Gandhi Balika Vidyalaya (KGBV).

(5) Model Schools and Navodaya Vidyalayas in the Districts apart than CBSE schools.

(6) Girls Hostels in Educationally Backward Blocks.

(7) Other Programmes. In India, in order to make secondary education more meaningful for

remunerative work without necessarily having to go in for higher education, a scheme of

vocationalisation of secondary education was started in the Seventh Plan. And The department of

Higher and technical education, has opened many Open universities other than the existing

Universities, Engineering colleges, Management colleges and private Medical colleges.

The question is Why India is not on par with many other foreign countries though following the

National Education Policy? The reason is India faces quite many impediments from grass root level to

infra structure level.

Problems of India’s Education System:

The education system in India faces a number of problems and challenges, affecting the

development Human resource, as would be clear from the following discussion:

The general standard of education is low and the percentage of failures and drop-outs is very high.

As noted by the IHDS (India Human Development Survey), while school enrolment has grown

rapidly and forms a cause of jubilation, the poor quality of schooling remains a major cause of

concern. Arithmetic skills are even poorer.11

Overcrowded classrooms, a crumbling infrastructure, lack of teaching aids, dull teaching methods,

poor pupil achievements etc., all result in a ‘discouragement effect’12 children tend to drop out of

school, and, at the same time, parents also lose their enthusiasm in sending their children to schools.

Regional disparities in a variety of educational indicators are striking. While States like Himachal

Pradesh have made rapid stride, Bihar, Rajasthan, Chattisgarh and Madhya Pradesh remain far

behind. According to IHDS, “this digital divide may lead to widening income differences between

regions in the years to come and deserves greater attention than hitherto accorded.’13

Muslim families, and to a lesser extent those from OBCs, face unique disadvantages. Much of the

policy focus has college admissions, but we find that this is too little and too late in students’

educational careers.

Many disadvantages begin as early as primary school. Secondary and senior secondary education

serves as a bridge between elementary and higher education. It also forms the basis of skill formation

in future. However, the spread of secondary education in India is quite limited. According to the


Eleventh Five Year Plan, the gross enrolment ratio in secondary and senior secondary schools was

only 39.91 percent in2004-05 and dropout rate was as high as 62 percent. 14

A critical overview of the higher education system in India points out a number of issues. .At present

it suffers from several weaknesses, such as proliferation of substandard institutions, deterioration of

academic standards, outdated curriculum, failure to maintain academic calendar and lack of adequate

support for research. GER in urban areas was 19.90 percent as against only 6.70 percent for rural

areas in 2004-05. As far as gender disparity is concerned, GER among males was 12.40 percent as

against 9.10 percent only for females in 2004-05. Apart from these problems, higher education is

highly subsidized which has put unnecessary financial burden on the government.

At present in the area of technical education, various imbalances and distortions exist. The

infrastructural facilities available in most of these institutions are inadequate due to resource crunch

and yet there has been enormous increase in public expenditure on technical education, leading to

serious problems of governance brought about by the influence of factors and forces extraneous to

educational objectives.

Overcoming these effects depends on improving accessibility, affordability and quality

schooling/education in India. Much can be done without delay in this field. Here is where we find entry

of FDI.

What do we understand of FDI? The Foreign Direct Investment means “cross border investment

made by a resident in one economy in an enterprise in another economy, with the objective of

establishing a lasting interest in the investee economy.

FDI is also described as “investment into the business of a country by a company in another

country”. Mostly the investment is into production by either buying a company in the target country or

by expanding operations of an existing business in that country”. Such investments can take place for

many reasons, including to take advantage of cheaper wages, special investment privileges (e.g. tax

exemptions) offered by the country.

Why do Countries seek FDI? Or why does India need FDI? The factors are:

(a) Domestic capital is inadequate for the purpose of economic growth;

(b) Foreign capital is usually essential, at least as a temporary measure, during period when the capital

market is in the process of development;

(c) Foreign capital usually brings it with other scarce productive factors like technology, technical

knowledge and business expertise.

Now let us note the major benefits of FDI:

(a) Improves Foreign Exchange position of the country;

(b) Employment generation and increase in production;

(c) Help in capital formation by bringing fresh capital;

(d) Helps in transfer of new technologies, management skills, intellectual property;

(e) Increases competition within the local market and this brings higher efficiencies;

(f) Helps in increasing exports;

(g) Increases tax revenues.

Some of the major economic sectors where India has attracted investment are as follows:-

Telecommunications Pharmacology and pharmaceuticals

Auto Parts Apparels

Information Technology Jewellery and Chemical


As we see foremost from the above discussion, that human resource is required in all services

sectors whether technical, medical, business or humanities and that India being a labour oriented country,

we should invite foreign investment for developing Human resource on par and as per the requirement of

the International world.

FDI can be involved for new technologies, management skills, intellectual property and enhancing the

capabilities of unskilled labour to skilled labour. Standard of education can improve.

It can also be utilized for Infrastructure development in the main centers of learning and in the rural

area where rural folks could be trained for small scale and cottage industries. Instead of collaboration

new universities could be opened which would benefit thousands of students who would otherwise

have to reappear for entrance test for higher studies abroad. For example: - our medical science

degrees are not accepted abroad and only a couple of technical colleges like the IITs and the NIITs

are recognized.

Also companies can start their branches: adopt trainees, impart skills and technical knowhow

improving the quality of life and living standard.

If we have foreign parties imparting better education and facilities, it would result in positive

competition amongst our own Educational setup and management and also generate employment.

With the spread of Education and upliftment of Human resource illiteracy, health issues and

corruption will also be under check.

A rise in skilled labour would widen market for manufactures in the rural sectors. Thus increasing

scope of industries.

Thus, we see the scope of FDI in India is expanding. India being the 3rd largest economy of the

world in terms of purchasing power parity looks attractive to the world for FDI. In the last few years,

certainly foreign investments have shown upward trend. Even Government of India, has been trying hard

to do away with the FDI caps for majority of the sectors. If FDI is welcomed in the Education and Human

resource development sector, then progress of labour capital would be rapid and impressive. What we

need now is not Mall culture but realistic and job oriented education for enhancement of human capital.

The latest information in this regard is that Prime Minister Narendra Modi has already started a policy for

increasing skilled labour.


Reference:

1. Theodore W. Schultz, “Investment in Human Capital,” in Ron Ayres (ed.), Development Studies:

An Introduction through Selected Readings (United Kingdom, 1995)

2. Theodore W. Schultz, Investment in Human Capital: The Role of Education and of Research

(New York,1977)

3. Frederick Harbison and Charles A. Myres, Education, Manpower, and Economic Growth(New

Delhi ,1970)

4. B.F.Kiker, “The Historical Roots of the Concepts of Human Capital,” Ronald A. Wykstra (ed.),

Human Capital Formation and Manpower Development. (New York, 1971)

5. Michael P. Toddaro and Stephen C.Smith, Economic Development (Person Education Asia,

Eighth edition, 2003)

6. M. Blaug “The Rate of Return on Investment in Education,” M. Blaug(ed.) Economics of

Education(Part 1) ( Harmondsworth, 1971)

7. Jandhyala B.C.Tilak, “Costs and Financing of Education in India: A Review of Issues, Problems

and Prospects” (Mioeo.), National Institute of Educational Planning and Administration, New

Delhi (1993).

8. World Bank, World Development Indicators 2009 (Washington, 2009)

9. Government of India, Planning Commission, Eleventh Five Year Plan, 2007-12 (Delhi, 2008),

Volume II

10. Government of India, Economic Survey, 2009-10 (Delhi, 2010)

11. Sonali B. Desai, et.al., Human Development in India (New Delhi, 2010)

12. Jean Dreze and Amartya Sen, India: Development and Participation (New Delhi, 2006)

13. Human development in India, op.cit.,p. 87

14. Eleventh Five year Plan, op.cit.,p. 14

15. RBI website, Newpaper reports, GoI data

16. S.K Mishra & V.K. Puri: Indian Economy, Himalaya Publishers ( New Delhi 2010) pg 137-147


Critical Appraisal of trends and policies of FDI in India *Bhosale, S.C.

I. Introduction:

Most of the developing countries suffer from low level of income and thereby the capital

accumulation. However, despite this shortage of capital, these countries have developed a strong urge for

industrialisation and economic development. World Investment Report 2015 (WIR15) highlighted the

massive worldwide financing needs for sustainable development and the important role that Foreign

Direct Investment (FDI) could play in bridging the investment gap, especially in developing countries

like India.

Global FDI inflows declined in 2014. It has fell by 16 per cent to $1.23 trillion in 2014, mostly

because of the fragility of the global economy, policy uncertainty for investors and elevated geopolitical

risks. However, inward FDI flows to developing economies reached their highest level at $681 billion

with a 2 per cent rise. Developing economies thus extended their lead in global inflows. China became

the world’s largest recipient of FDI. Among the top 10 FDI recipients in the world, 5 are developing

economies. (UNCTAD, 2015)

In the recent time, developing Asia saw FDI inflows grow to historically high levels. They

reached nearly half a trillion dollars in 2014. FDI inflows to East and South-East Asia increased by 10 per

cent to $381 billion. In recent years, multinational enterprises (MNEs) have become a major force in

enhancing regional connectivity in the sub-region, through cross-border investment in infrastructure. The

security situation in West Asia has led to a six-year continuous decline of FDI flows.In South Asia, FDI

has increased in manufacturing, particularly in the automotive industry.

II. Objectives of the study:

1. To study the FDI flows to major Asian countries with particular focus on India.

2. To evaluate the trend of FDI inflow and outflow of India.

3. To analyse recent changes in India’s FDI policy framework.

4. To critical appraisal of issues of FDI in India.

III. Research methodology:

The present study mainly depends upon secondary source of data. The important data sources are

different reports of United Nations Conference on Trade and Development (UNCTAD), World Bank,

Reserve Bank of India (RBI) and Government of India. Besides the information on FDI policy has

collected from the various data sources like www.makeinindia.com , www.dipp.nic.in , etc.

*Asst. Professor in Economics, Chetana's H S College of Commerce and Economics and Kusumtai Choudhari College of Arts,

Govt. Colony, Bandra (E), Mumbai - 400051 email: [email protected]


Abstract:

The FDI can fill the investment gap of developing countries. It considered as an important non-debt

creating source of financing current account deficit as well.Global FDI inflow declined in recent time

because of fragility, uncertainty and geopolitical risks. However, inward FDI to developing countries

increasing drastically. The present study observed that growth of FDI inflow and outflow in India

during study period is negative and insignificant as well.Indicating that India is only seen as a stock gap

market and still not a favoured destination for the FDI.Recent FDI policy changes and program like

Make in India will definitely improve the ease of doing business in India and therefore the FDI in India.

Keywords: FDI in India, FDI policy, Sectoral composition of FDI

http://www.makeinindia.com/

http://www.dipp.nic.in/


The collected data has analysed using various statistical techniques like Compound Annual Growth Rate

(GAGR), Standard deviation, Coefficient of Variations, Logistic regression analysis, t test statistics and

some diagrammatic analysis tools.

IV. FDI Inflows in India

The significant increase in FDI inflows to India reflected the impact of liberalisation of the

economy since the early 1990s as well as gradual opening up of the capital account. As part of the capital

account liberalisation, FDI was gradually allowed in almost all sectors, except a few on grounds of

strategic importance, subject to compliance of sector specific rules and regulations. The large and stable

FDI flows also increasingly financed the current account deficit over the period.

With annual inflows of $32 billion, in 2011, India receives the largest share of FDI inflows in

South Asia. Inward FDI stock stood at $202 billion, making India one of the largest FDI recipients in the

developing world. The country dominates outward FDI from the region as well, and outflows amounted

to $15 billion in 2011.

FDI inflows have targeted a wide range of industries in India. In recent years, services accounted

for about two-thirds of FDI inflows to the country, with business activities, construction and finance

being the major targets. Manufacturing accounts for around one-fifth to one-third of FDI inflows in

recent years, and FDI in the primary sector is negligible. Mauritius is the largest source of FDI to India,

perhaps reflecting significant 'round-tripping' flows between the two countries. Apart from Mauritius,

Singapore, the United Kingdom, the United States and Cyprus are the main investing countries.

An investor-friendly FDI policy has been put in place, whereby FDI up to 100 per cent is

permitted under the automatic route in most sectors/activities. In 2014, FDI policy has been further

liberalized. FDI up to 49 per cent through the government route has been permitted in the defence

industry. FDI up to 100 per cent through the automatic route has been permitted in construction,

operation, and maintenance of identified railway transport infrastructure. Norms related to minimum land

area, capitalization, and repatriation of funds for FDI in construction development projects have been

further liberalized. (GOI, 2015)

Equity FDI inflow to India: The major source of FDI inflow in India is in the form equity inflow and

reinvested earnings. Sector specific equity FDI inflow has given in the following table.

Table no. 1 -Equity FDI inflow to India (US $ billion)

Year \ Sector Manufactures Services Construction, Real

estate and mining Others Total

2006-07 1.6 (17.6) 5.3 (56.9) 1.4 (15.5) 0.9 (9.9) 9.3 (100)

2007-08 3.7 (19.2) 8.0 (41.2) 4.3 (22.4) 3.3 (17.2) 19.4 (100)

2008-09 4.8 (21.0) 10.2 (45.1) 4.2 (18.6) 3.4 (15.2) 22.7 (100)

2009-10 5.1 (22.9) 7.4 (32.8) 6.0 (26.6) 4 (17.6) 22.5 (100)

2010-11 4.8 (32.1) 4.5 (30.1) 2.6 (17.6) 3 (20.1) 14.9 (100)

CAGR % 11.68 -0.14 7.72 11.77 5.65

t test 2.49 -0.34 0.85 1.61 0.90

CV % 32.29 28.61 42.56 36.33 28.63

* Figures in bracket indicates percentage to the total of concern year.

Source: Computed, data from RBI (2012)


There is a declining trend in the equity FDi inflow in service sector to India. Its share has declined

from about 57 percent to 30 percent during 2006-07 to 2010-11. While, manufacturing sector growing its

share very fast. It has almost doubled during the same period. It has registered highest growth rate (i.e.

11.68 per cent) which is also statistically significant. Whereas, services sector has negative growth, but

non-significant. Construction, real estate and mining also has good growth but not significant.

From year 2000 to 2011 the FDI equity inflow to India was mainly from Mauritius, Singapore,

USA, UK and Netherlands. It accounts about 67 per cent of cumulative foreign equity capital that India

received during said period.India hassigned special treaty with Mauritius relates to various international

trade issues. Some of the western developed countries are making joint ventures with Mauritius

companiesand channelizing their investment in India to get benefit of tax haven.

V. Statistical Analysis:

Historically the amount of FDI inflow to developed countries was remained higher than the

developing nations. In the year 2014, for the first time in history the FDI inflow to developing countries

was more than the developed countries. It signifies the growth potential of these emerging market

economies.

Source: Computed, data from UNCTAD (2015)

The above chart shows the CAGR of some of the major region or nations FDI for 2009 to 2014.

World has recorded very negligible growth in FDI inflow and outflow as well. There is a significant

growth of FDI to developing countries, particularly Asian countries. Malaysia, Indonesia and China

reached to their record high level (i.e. 35, 28, 9 % respectively). Whereas, India and Saudi Arabia has

registered negative growth.



-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

Chart-1: Compound Annual Growth of FDI, 2009-2014

Inflow CAGR % Outflow CAGR %

0

20000

40000

60000

80000

100000

120000

140000

2009 2010 2011 2012 2013 2014

Chart-2:Inflow of FDI in Asian countries, 2009-2014(Millions of dollers)

China Hong Kong, China Indonesia Malaysia

Singapore India Saudi Arabia

Here is a brief comparison of FDI inflow among the major Asian countries. China stays at peak;

Hong Kong, China has some volatility but remains at number two. Singapore is growing very fast as

compared to any other Asian country. India remained stagnant at number four. Indonesia and Malaysia

are also doing well, but the volume of inflow is relatively less. Then Saudi Arabia has declining trend of

FDI inflow with big negative growth rate.


The average amount of FDI inflow and outflow to the major Asian countries has given in the

above chart. An average FDI inflow received by China, Hong Kong and Singapore is respectively four,

three and two times of FDI comes to India. The FDI outflow of these countries are also respectively

eight, nine and three times of FDI outflow from India.


The above diagram shows the trends of FDI in India. The inflow of FDI to India is always

remained more than its outflow. Both inflow and outflow shows the negative trend. However, decline in

outflow is much higher than the decline in inflow during the same period, which acquired from the value

of regression coefficient (i.e. -0.274 &-0.014 respectively).


0.00

20000.00

40000.00

60000.00

80000.00

100000.00

120000.00

140000.00

China Hong Kong,China

Indonesia Malaysia Singapore India SaudiArabia

Chart-3: An average FDI inflow and outflow of major Asian countries, 2009-2014 (Millions of dollers)

y = 32204e-0.014x

R² = 0.0249

y = 22800e-0.274x

R² = 0.3649

0

5000

10000

15000

20000

25000

30000

35000

40000

2009 2010 2011 2012 2013 2014

Chart-4:Trends of FDI in India (Millions of dollers)

FDI Inflow FDI Outflow

Expon. (FDI Inflow) Expon. (FDI Outflow)


VI. Growth analysis:

Statistical analysis on FDI inflow and outflow during 2009 to 2014 in a major regions or

economies of the world has carried out. The following table shows the Compound Annual Growth Rate, t

test statistics calculated using the logistic regression and Coefficient of Variation of the same. Here an

analysis of significance of growth has done.

Table no. 3 Statistical analysis of FDI flow, 2009-2014

Source: Computed, data from WIR, 2015

It found from the above table that developing countries are performing much better than

developed countries in both FDI inflow and outflow. Asia accounts the significant growth in inflow,

however among the Asian countries, Malaysia has highest coefficient of variation (i.e. 39.95 per cent)

and growth rate (i.e. 35.46 per cent) but it was not statistically significant. Whereas, Indonesia, Singapore

and China has significant growth rate. Saudi Arabia has lowest growth rate (i.e. -27.90 per cent) in FDI

inflow during the same. The main reason is security situation in West Asia, it led to a six-year continuous

decline of FDI flows.


0

5000

10000

15000

20000

25000

2003 2004 2005 2006 2007 2008 2009 2010 2011

C h a r t - 5 : I n d i a ' s F D I by i n d u st r y( M i l l i on s o f d o l l a rs )

Primary

Secondary

Tertiary

CAGR % t test CV % CAGR % t test CV %

World 1.04 0.37 9.63 1.98 0.65 10.75

Developed countries -4.02 -1.06 14.29 -1.97 -0.57 13.17

Developing countries 6.98 3.67 12.07 11.43 4.10 19.22

Asia 5.70 3.20 10.58 11.90 4.92 20.69

East Asia 6.67 3.00 12.51 13.18 4.81 22.42

China 5.03 3.04 9.36 15.05 24.93 23.77

Hong Kong, China 8.75 1.89 20.94 12.29 2.32 27.87

South-East Asia 18.63 2.99 27.66 11.40 3.86 21.13

Indonesia 27.83 2.76 35.13 26.12 2.82 40.11

Malaysia 35.46 1.91 39.95 12.14 2.22 21.87

Singapore 18.24 2.84 27.34 3.69 0.41 27.94

South Asia -1.17 -0.35 11.43 -21.47 -1.47 42.07

India -1.40 -0.32 14.84 -23.95 -1.52 45.96

West Asia -9.55 -8.67 18.41 18.50 3.30 32.73

Saudi Arabia -27.90 -10.40 57.74 17.00 4.12 26.03

FDI inflow FDI outflowRegion / Economy

In South Asia, FDI has increased in manufacturing, including in the automotive industry. Even

though India remained vulnerable in FDI; it has negative growth in both inflow and outflow. If we look at

the FDI outflow, India has highest coefficient of variation and lowest (i.e. -23.95 per cent) growth rate

which is statistically not significant. Indonesia recorded highest outflow growth rate (i.e. 26.12 per cent)

among the Asian countries. The automotive industry accounts for about 20 per cent of India’s

manufacturing value added. With annual production of 18 million vehicles, India is the seventh largest

automotive producer and, with its large population and growing economy, is likely to rise in the global

ranking. (WIR, 2015)

VII. Important policy changes:

The Government of India on April 1, 2011 further liberalised the FDI policy to promote FDI

inflows to India. These measures, included (i) Allowing issuance of equity shares against non-cash

transactions such as import of capital goods under the approval route. (ii) Removal of the condition of

prior approval in case of existing joint ventures/technical collaborations in the same field. (iii) Providing

the flexibility to companies to prescribe a conversion formula subject to FEMA/SEBI guidelines instead

of specifying the price of convertible instruments upfront. (iv) Simplifying the procedures for

classification of companies into two categories – companies owned or controlled by foreign investors and

companies owned and controlled by Indian residents.and (v) allowing FDI in the development and

production of seeds and planting material without the stipulation of under controlled conditions. These

measures was expected to boost India’s image as a preferred investment destination and attract FDI

inflows to India in the near future. (RBI, 2012)

The recent FDI policy which became effective from November 24, 2015, removes the earlier

condition on minimum investments (of $5 million earlier), minimum area and eases exit options for FDI

investors. Easing of investment norms under FDI policy for the real estate sector is more of a long-term

story, and is unlikely to result in any immediate increase in FDI in the near term. (Economic Times, 1

Dec.2015)

The latest changes to the country’s FDI policy could end up hurting the government’s ambition to

make India a global manufacturing hub, as they have introduced an element of uncertainty over

manufacturing investments where none existed before.The new FDI policy announced by the

government, involved liberalising norms for 15 sectors, including defence, construction, civil aviation,

FM radio, single brand retail, private banks and manufacturing. (VikasDhoot, 2015)

Recently, the Indian Government has passed an ordinance to increase the FDI cap in insurance to

49 percent. In addition, commencing a program of disinvestments under which 10 percent of the

government’s stake in Coal India has offered to the public, yielding about 22,500 crore, of which 5,800

crore was from foreign investors. The cumulative FDI inflows to India from April 2000 to November

2014 were about $ 350.9 billion. Services, construction, telecommunications, computer software and

hardware, drugs and pharmaceuticals, automobile industry, chemicals, and power have attracted an

excessively high share of total inflows. (GOI, 2015)

Recent initiatives to boost industrial growth

1. Make in India: The Make in India programme aimed to facilitate investment, foster innovation,

enhance skill development, protect intellectual property, and build best-in-class manufacturing

infrastructure. Information on twenty-five sectors has provided on a web portal along with details of FDI

policy, National Manufacturing Policy, intellectual property rights, and the Delhi-Mumbai Industrial

Corridor and other National Industrial Corridors. An Investor Facilitation Cell has created in 'Invest India'

to guide, assist, and handhold investors.

2. Ease of Doing Business: To improve India’s low Ease of Doing Business Index ranking, reforms are

being undertaken in areas such as starting a business, dealing with construction permits, registration of

property, power supply, paying taxes, enforcing contracts, and resolving insolvency.


VIII. Conclusion:

The investment gap in developing economies can be filled by FDI, more particularly in

infrastructural development. The new economic policy-1991 and further liberalization in succeeding FDI

policies boost the FDI in India. However, the statistical analysis concludes that the growth rate of India’s

FDI inflow and outflow during 2009 to 2014 is negative and insignificant as well. Indicating that India is

only seen as a stock gap market and still not a favoured destination for the FDI. The manufacturing sector

has a great growth potential. Recent FDI policy changes and program like Make in India will definitely

improve the ease of doing business in India and therefore the FDI in manufacturing sector.Nevertheless,

massive and concentrated FDI inflow (particularly FII) creates reasons to be concerned with their

macroeconomic implications and the danger of an equally sudden reversal.

IX. References:

1. Economic Times (2015), New FDI policy impact on realty to be more long term, unlikely to

increase FDI in near term, 1st Dec. 2015

2. GOI (2015), Economic Survey 2014-15, Economic Division, Department of Economic Affairs,

Ministry of Finance, Government of India, February 2015

3. RBI (2012), Foreign Direct Investment Flows to India, Research study prepared in the Division of

International Trade and Finance of the Department of Economic and Policy Research, Reserve

Bank of India

4. UNCTAD (2009), Training Manual on Statistics for FDI and the Operations of TNCs, United

Nations Publication,Sales No. E.09.II.D.2, ISBN 978-92-1-112763-8

http://unctad.org/en/Docs/diaeia20091_en.pdf Accessed on 10th Dec, 2015

5. UNCTAD (2014), Investment country profiles – India (March,2013), The Division on Investment

and Enterprise of UNCTAD (UNCTAD/WEB/DIAE/IA/2013/4)

http://unctad.org/en/PublicationsLibrary/webdiaeia2013d4_en.pdf Accessed on 15thDec, 2015

6. UNCTAD (2015), World Investment Report 2015, United Nations Publication, Sales No.

E.15.II.D.5, ISBN 978-92-1-112891-8, eISBN 978-92-1-057403-7

7. VikasDhoot (2015), Latest FDI reforms could hit Make in India, The Hindu, 13th Dec. 2015.

8. World Bank (2016), Doing Business 2016: Measuring Regulatory Quality and Efficiency,

Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0667-4


http://unctad.org/en/Docs/diaeia20091_en.pdf

http://unctad.org/en/PublicationsLibrary/webdiaeia2013d4_en.pdf

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