FDI in Services Sector: An Empirical Analysis with Special Reference to the Delhi Region
Sebastian V. J.
The economic role of FDI is increasingly becoming significant in the Indian economy with the transition of FDI policy from a restrictive phase of seventies and early eighties to a relatively liberal phase of nineties. FDI is an important indicator of economic growth and also stimulator of competitiveness. Foreign direct investment has been seen as a dominant determinant to achieve high rate of economic growth because it brings in scarce capital resource, raise technological capability and increase efficiency through enhancing domestic competition. The share of services sector is large in terms of GDP. In developed countries, majority of GDP is contributed by services sector. In developing countries like India, share of services has been increasing in terms of GDP. The contribution of services sector in Indian economy is now almost half of GDP. It is expected to increase further with very high growth rates. After liberalization, FDI inwards flows have increased tremendously. A look at FDI statistics shows that distribution of FDI is uneven across sectors. What is the role of FDI in services sector? Which countries are contributing to service sector FDI. What are the main sectors in services where FDI is flowing? What is the pattern of investment in each sub sector? Which firms are receiving more investment? This paper looks into these issues by examining primary data. A microanalysis of firm investment pattern has been done for Delhi region. Using primary data, this examines investment patterns of firms in 3 major sectors from 2004 to 2006. Data used is for Delhi region taken from Department of Industrial Policy and Promotion It is seen that FDI flow is skewed across different sub sectors. The financial services sector is receiving much more FDI as compared to other sectors. Few firms have much more FDI flowing in as compared to others. Three firms namely, Citi Financial, Kappa Industries and India Bulls are receiving maximum FDI. Policymakers liberalized FDI norms for overall development of the economy. Policy should be made so that all firms, small, medium and large benefit from investment process.
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