Foreign Direct Investment: Impacts on Indian Economy (A socio-Economic analysis)

Foreign direct investment (FDI) as a strategic component of investment is needed by India for achieving the economic reforms and maintains the pace of growth and development of the economy. The paces of FDI inflows in India initially were low due to regulatory policy framework. Multinational enterprises (MNEs) have become one of the key drivers of the world economy and their importance continues to grow around the world. However, the activities of multinational enterprises abroad have also aroused much controversy and social concerns. For example, MNEs have been accused of practicing unfair competition when taking advantage of low wages and labour standards abroad. In some cases, MNEs have also been accused of violating human and labour rights in developing countries where governments fail to enforce such rights effectively. In many OECD countries, civil society has appealed to MNEs to ensure that internationally-recognized labour norms are respected throughout their foreign operations.

The study tries to find out how FDI seen as an important economic catalyst of Indian economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfers. The main purpose of the study is to investigate the impact of FDI on economic growth in India. Foreign Direct Investment (FDI) is fund flow between the countries in the form of inflow or outflow by which one can able to gain some benefit from their investment whereas another can exploit the opportunity to enhance the productivity and find out better position through performance

The FDI may also affect due to the government trade barriers and policies for the foreign investments and leads to less or more effective towards contribution in economy as well as GDP of the economy. The studies try to find out the implications which affect the economic scenario and also measure the level of predominance by the factors for economic contribution to India. This paper brief presents the main insights from OECD work on the social impact of inward FDI in host countries. It looks at how much MNEs contribute to better working conditions in host countries and what governments, in both home and host countries, can do to promote good work practices by MNEs.