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IMPACT OF LIBERALIZATION ON FDI STRUCTURE IN INDIA

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Author(s): Dr. Gulshan Kumar | Neerja Dhingra

Journal: International Journal of Economics and Research
ISSN 2229-6158

Volume: 02;
Issue: 02;
Start page: 80;
Date: 2011;
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Keywords: FDI | structure | methodology.

ABSTRACT
Direct investment across national borders is a distinct feature of international economics, which has gained intense attention of all the countries of the world recently. Foreign direct investment (FDI) is deemed to be a growth catalyst since it is usually accompanied by entrepreneurial, managerial and technical skills which are indispensable for economic growth (Humphrey,1960). Foreign direct investment is one of the most strategic and vital tools for developing a country‚Äüs competitiveness and efforts must be made to garner huge share of FDI in the country (Badar, 2006). Going by this ideology FDI is being sought by most of the developing countries of the world for promoting the cause of economic development. India, without exception, as in case of other developing countries, is eager to prompt her economic growth which compels her to accept and seek assistance of foreign direct investment. The country also became host to massive inflows of FDI during 1990s and 2000s in concert with her efforts to create more favorable settings for it through trade liberalization, market deregulation, privatization of national ownerships and encouragement to regional integration. Actually in the early 1980s, Indian government adopted a liberal policy towards FDI, especially in high technology areas and exports and it was then that FDI friendly environment was created. Again a host of incentives, exemptions and relaxations in the degree of flexibility concerning foreign ownership adopted during 1990s gave a major boost to FDI inflows. In a way eighties were the fore-runners of the liberalization policy of 1990s and so this period is termed as preliberalization period in the study. The period after 1991 is termed as post liberalization period during which not only the quantum of FDI to India escalated but the sectoral composition of FDI also underwent tremendous change
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