Personal exercises forinternational economy section subject fdi inflow in india period 2015 2022 and suggest tovietnam

is a kind in the era of globalization, foreign direct investment plays an importantrole in the development of both developing and developed countries.. FDI offers a range of benefits, in

UNIVERSITY OF INTERNATIONAL ECONOMY

INTERNATIONAL ECONOMY AND TRADE INSTITUTE DEPARTMENT OF INTERNATIONAL ECONOMY

PERSONAL EXERCISES FOR

INTERNATIONAL ECONOMY SECTION

Subject: FDI inflow in India period 2015-2022 and suggest to

VietnamStudent’s name: NGUYỄN TUẤN MINH

Student’s code: 11213899

Specialized: High quality international economy

Class: High quality international economy 63A

Generation: Formal

Instructors: PGS.TS Nguyễn Thường Lạng

Email: langnt@neu.edu.vn langnguyen3300@gmail.com,

Phone number: 0983478486

Period: Semester I of the school year 2022- 2023

Student’s phone numbers: 0934402050

Student’s Email: nguyentuanminh20033@gmail.com

HÀ NỘI, 9/2022

I hereby declare that this assignment is entirely my own work The quotations andmaterials used in the exercise are completely honest, are sourced from and guaranteed tothe highest degree of accuracy to the best of my knowledge If it is not as stated above, Itake responsibility for my assignment

Hanoi September 14, 2022Nguyễn Tuấn MinhTHANK YOU

First of all, I would like to express my deep gratitude to the lecturers of the NationalEconomics University in general and the lecturers of the Institute of International Tradeand Economics in particular, who have dedicatedly taught and communicated to us.valuable knowledge and experience

Especially, I would like to thank Assoc.Prof.Dr Nguyen Thuong Lang, who directlyguided me throughout the course of the exercise During the time working with you, I havenot stopped learning to accumulate a lot of useful knowledge for myself, but also havelearned the spirit of serious and effective work, these are very necessary things for me in

my career future study and work

Finally, I would like to express my sincere thanks to my family and friends whohave always encouraged, contributed ideas, and helped in the process of studying andresearching to complete this exercise

Hanoi, September 14, 2022Nguyễn Tuấn Minh

1 Introduction on FDI

Foreign Direct Investment (FDI) is the investment in another country by purchasingthe business in that country or expanding the operations of an existing business in thatcountry is a kind in the era of globalization, foreign direct investment plays an importantrole in the development of both developing and developed countries FDI is associated withimproved economic growth and development in host countries, leading to the emergence of

a global race to attract FDI FDI offers a range of benefits, including the introduction ofnew technologies, innovative products, new market expansion, employment opportunities,and the introduction of new skills, which are reflected in income growth in countries.Foreign direct investment is one of the means of promoting economic globalization.Investment has always been a problem for a developing country like India The world isglobalizing, and all countries are liberalizing their policies to welcome investment fromcountries with abundant capital resources Developed countries are eyeing new marketswith abundant labor, wide product range and high margins Therefore, foreign directinvestment (FDI) has become a battleground in emerging markets

Foreign investment plays an important role in the development of an economy likeIndia Many countries offer many incentives to attract foreign direct investment (FDI) Theneed for foreign direct investment depends on the savings and investment rates of eachcountry Foreign direct investment acts as a bridge to bridge the gap between investmentand savings During economic development, foreign capital helps meet austerity domesticdemand, increases the efficiency and productivity of existing production capacity, andprovides access to superior technology that creates new production opportunities India'srecord GDP growth over the past decade has lifted millions of people out of poverty andmade the country a leading destination for foreign direct investment A recent UNCTADstudy projects that India will become the second most important FDI destination formultinationals after China over the period 2015-2022 Services, telecommunications,construction, computer software and hardware, and automobiles are the major sectors that

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have increased her FDI inflows to India Countries such as Mauritius, Singapore, US and

UK are among the major sources of foreign direct investment in India

2 Overview in India and the current situation

As you know, India is the second most populous and largest democracy in the world,with its rule of law and highly skilled English-speaking workforce, which makes thecountry a favorite for foreign investors considered heaven Nevertheless, India appears to

be suffering from various self-imposed restrictions and problems in fully opening itsmarket to global investors through the implementation of sweeping economic reforms.Some of the main obstacles to the low are political instability, poor infrastructure, complextax and customs policies, strict labor laws, entrenched corruption, and governmentregulation First, there is a lack of proper infrastructure This has been cited as a majorobstacle to the FDI inflow into India This bottleneck in the form of poor infrastructurediscourages foreign investors from investing in India India's biggest long-standinginfrastructure problem is electricity Power outages are considered a common problem,forcing many industries to close their operations Second, strict labor laws Large Indiancompanies are prohibited from reducing or laying off employees or closing offices withoutstate government approval These laws protect workers and thwart legitimate attempts torestructure companies To eliminate unnecessary labor, companies require consent fromboth employees and state governments, but consent is rarely given In addition, unionsextort huge sums of money from companies through generous voluntary pension schemes

A third point to discuss is the corruption found in nearly every public service, from defense

to food supplement distribution to the poor to the generation and transmission of electricalenergy A combination of legal hurdles, lack of institutional reform, bureaucratic decision-making, and allegations of corruption at the top have deterred foreign investors fromIndiaAdded to this is the lack of decision-making powers of state governments The reformprocess to liberalize the economy is largely centrist, with less power given to stategovernments The central government continues to control most major infrastructure areas.Brazil, China, and Russia are examples of local governments leading reforms and

encouraging more central government action Next is the limited scope of exportprocessing zones India's Export Processing Zones are lacking momentum for severalreasons, including B Relatively limited size The government's general ambivalence inattracting foreign direct investment An unclear and variable stimulus package associatedwith the zone Central government authority to regulate zones India, which set up its firstExport Processing Zone (EPZ) in 1965, has failed to develop the zone compared to China,which only took the initiative to set it up in 1980 Sixth is the high corporate tax rate Thecorporate tax rate in East Asia is generally between 15% and 30%, while the foreigncorporate tax rate in India is 48% High corporate tax rates are a major disincentive toforeign investment in India Finally, there are indecisive governments and politicalinstability There have been so many anomalies on the government's part in the last 20years This still influences her direct FDI inflow to India as she is keen on security andconstant return on investment.

Apart from India having some shortcomings, there are still some determinants ofFDI affecting the country It is stable politics India's stable economic and social policiesare attracting investors across borders Investors prefer countries with stable economicpolicies When the government makes policy changes that affect your business Businessesrequire the use of large sums of money, and policy changes that disadvantage investorshave a negative impact The second is the economic factor Various economic factors aredriving foreign direct investment These include interest rate loans, tax breaks, subsidies,subsidies, and lifting of limits and restrictions The Indian government has given many taxexemptions and subsidies to foreign investors who contribute to the development of theeconomy Third is the cheap labor market India has an abundant workforce in the form ofskilled and unskilled manpower A foreign investor will take advantage of the difference inlabor costs as they have cheap and skilled labor Example: A foreign company invests in hisBPO in India which needs skilled labor and our company also provided the same Next isbasic infrastructure Although India is a developing country, it has developed specialeconomic zones and has the necessary infrastructure such as roads, efficient transport,

registered departures of freight forwarders around the world, information andcommunication networks/technology, electricity, financial institutions, and legislation Wefocus on building structure Systems and other basic equipment critical to business success.

A strong legal system and a modern infrastructure that supports the efficient distribution ofgoods and services in the host country The sixth is the untapped market, which has greatpotential for investors as it has the majority of untapped or untapped markets India has ahuge potential customer market and a large middle class income group to target for newmarkets Example: BPO was a sector where investors had a lot of room to explore themarket, one call service and near customer satisfaction Finally, the availability of naturalresources As you know, India has huge number of natural resources such as coal, iron oreand natural gas Once natural resources become available, they can be used for productionprocesses and mining by foreign investors As India is a developing country, capital is one

of the scarce resources normally required for economic development Capital is limited,and there are many problems such as health, poverty, employment, education, research anddevelopment, outdated technology, and international competition This FDI influx intoIndia from around the world will gather funds with a range of lower costs, bettertechnology, job creation, improved technology transfer, more trade, connectivity, andspillover to domestic firms help you to the following arguments are in favor of foreigninvestment First, India maintains a high level of investment Least developed anddeveloping countries want to industrialize and develop, so investment levels need to risesignificantly Savings are low due to poverty and low GDP Therefore, the gap betweenincome and savings must be filled through foreign direct investment The second is thetechnology gap The Indian scenario requires technical support from abroad for theprovision of professional services, training of Indian personnel, and industry education,research, and training institutions It can only be realized through private foreigninvestment or foreign cooperation The third is the development of natural resources Indiahas abundant natural resources such as coal and steel, but cooperation with other countries

is necessary to extract these resources Next, we need to understand the initial risk Due tothe lack of capital in developing countries, the risk of investing in new ventures and

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industrialization projects is high Foreign capital is therefore useful for these high-riskinvestments We also need to know about the development of basic economicinfrastructure In recent years, foreign financial institutions and governments of developedcountries have provided large amounts of money to the least developed countries FDIhelps develop infrastructure by setting up companies in different parts of the country Thereare special economic zones developed by the government to promote industrial growth It

is also important to focus on improving the balance of payments by taking advantage of theinflow of foreign direct investment Firms who believe that goods manufactured in Indiaare cheaper will manufacture the goods and export them to other countries This helpsincrease exports After all, foreign companies help promote competition Foreigncompanies have always developed better technologies, processes and innovationscompared to domestic companies They develop deals that allow local businesses to winand survive in the market

3 FDI investment figures from the years 2015-2022.

We will initiate with 2015- 16 first

Source: FDI Statistics, Department of Industrial Policy& Promotion, Ministry ofCommerce & Industry, Government of India, 2015

The table shows the amount of FDI inflows during the Financial Year, 2015(June) Itshows the total amount of FDI Inflows both in terms of Rs Crore and in US $ million.Point 1 shows the sum of equity inflows, reinvested earnings and other capital Total, amount of inflows is 2,929 in US $ million Point 2 shows the FDI equity inflowsamounted 13,115 in Rs Crore and 2,054 in US $ million.

Source: FDI Statistics, Department of Industrial Policy& Promotion, Ministry ofCommerce & Industry, Government of India, 2015

The table above shows the amount of FDI inflows during Financial Year from April

2015 to March 2016 (up to June, 2015) It shows the amount in Rs Crore and in US $ mn.The highest FDI inflows in the country is in the month of May 2015 i.e., 24,564 in Rs.Crore and 3,850 in US $ mn Followed by April 2015 and June 2015 with inflows 22,620

in Rs Crore (3,605 in US$ mn) and 13,115 in Rs Crore (2,045 in US$ mn) respectively Itcan also be observed that there is 40% growth over last year

Source: FDI Statistics, Department of Industrial Policy& Promotion, Ministry ofCommerce & Industry, Government of India, 2015.

The above Table No.5 depicts the country having the highest FDI in India Thereport shows that the MAURITIUS country has the highest foreign investor in India with34% After Mauritius, Singapore and U.K invest the highest FDI in India with 14% and9% respectively Japan also gets 4th position with 7% FDI in India

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The next one we will discuss is the FDI inflow from 2016- 2017.

As you can see fromthe 2016-2017 column.The Ministry of Trade andIndustry said on Fridaythat foreign directinvestment inflows in2016-17 fell as the

government relaxed rules

to attract globalconglomerates to establishpositions in sectors such asdefense and railways said

he reached an all-timehigh of $60.1 billion.Analog Devices'regulations have undergone significant revisions in areas such as broadcasting, retail, andaviation Modi's government changed the law, raising the cap on foreign investment ininsurance and pensions from his previous 26% to his 49% In addition, initiatives such asthe introduction of combined caps in the FDI policy and the increase in FIPB approval capsare also underway to facilitate business in the country For the retail sale of food, thegovernment has authorized £100 with the unconditional condition that such food must bemanufactured or produced in India

Sources:https://dpiit.gov.in/sites/default/files/FDI_FactSheet_January_March2017.pdfThe table above shows that the data fluctuates However, the growth rate from 2016

to 2017 increased by 11% in Rupees 9% in crores and US dollars

Source: https://dpiit.gov.in/sites/default/files/FDI_FactSheet_January_March2017.pdfAccording to table E, Mauritius has the highest percentage of total inflows at 34%,equivalent to 105,587 Rs Crore (15,728M US$) The UAE has the smallest share at 1%, orapproximately 4,539 Rs crore (675 million US dollars).

Source:https://dpiit.gov.in/sites/default/files/FDI_FactSheet_January_March2017.pdf

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Table F shows that the services sector has the biggest percentage (18%), which isequivalent to 58,214 Rs Crore (8,684M US$) With 3%, the power and metallurgicalindustries are the lowest Power is the smallest with 7,473 Rs Crore (1,113M US$).

We will change to FDI inflows year 2017- 18

Foreign direct investment (FDI) into India appears to have fallen to USD 44.85billion in 2017-18 as inflow growth hit a five-year low of 3% According to the latest datafrom the Department of Industrial Policy and Promotion (DIPP), foreign direct investment

he increased by just 3% from 2017 to 2018 to reach $44.85 billion Key sectors with thehighest foreign inflows in the past fiscal year included Services ($6.7 billion), Computer

Software and Hardware ($6.15 billion), Telecommunications ($6.21 billion), and Trade($43.4 billion) billion) ) and construction ($2.73) trillion) Automotive ($2 billion),Energy ($1.62 billion) Mauritius brought in her $15.94 billion in 2017-2018, making itIndia's largest source of foreign direct investment This is followed by Singapore ($12.18billion), the Netherlands ($2.8 billion), the United States ($2.1 billion) and Japan ($1.61billion) Furthermore, the data show that her FDI capital inflow in 2017-18 was US$44.8billion, a record high for a financial year

Source: https://dpiit.gov.in/sites/default/files/FDI_FactSheet_29June2018.pdf

Table C shows that there is a 1% decrease in Rs Crore from 2016-17 to 2017-18.However, there is a 3% increase in the US dollar The biggest figure is 21,198 Rs Crore(8,004M US$) in August 2017 The lowest month is October, with 17,454 Rs Crore(2,682M US$)

Source: https://dpiit.gov.in/sites/default/files/FDI_FactSheet_29June2018.pdf

Table D shows that Mauritius has the largest percentage (34%, equivalent to102,492 Rs) Crore (15,941 million US dollars) France and the UAE have the lowest at2% As a result, France has the fewest with 3,297 Rs Crore (511 million US dollars)

Source: https://dpiit.gov.in/sites/default/files/FDI_FactSheet_29June2018.pdf

Mauritius has the highest percentage (34%, equivalent to 102,492 Rs) in Table D

Crore (15,941 million USdollars) France and theUnited Arab Emirateshave the lowest at 2%.France has the fewest, at3,297 Rs Crore (511million US dollars)

We will continue to 2019

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Foreign direct investment inflows to India increased last year compared to the previousyear, with foreign investment reaching US$62 billion in 2018-19, Trade Minister PiyushGoyal said in Lok Sabha on Wednesday Goyal's response was in response to a questionfrom MP Abdul Khaleque about whether foreign direct investment in India fell in his 2018-

19 compared to the previous year “No, foreign direct investment in fiscal year 2018-19 hasactually increased compared to the previous year,” he said at question time USD 60.97billion in 2017-18, USD 60.22 billion in 2016-17 and USD 55.56 billion in 2015-16

Source:https://dpiit.gov.in/sites/default/files/FDI_Factsheet_27May2019.pdf

The table above shows that the level of FDI equity inflows increased by about 7%.Ten million However, in USD terms, it is down about 1% The highest month of 2018-19was April 2018 at Rs 35,104 crore and US$5,348 respectively and the lowest month wasNovember 2018 at Rs 12,495 crore and US$1,739

Source: https://dpiit.gov.in/sites/default/files/FDI_Factsheet_27May2019.pdf