Dear Students
I am opening the following question for blog discussion for participation by all. Meaningful answers will carry marks out of 3. The blog discussion opens tomorrow evening from 6-00 PM (14-03-17) and closes on 9-00 PM on 17-0-17.
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Discussion Topic: "FDI or International Trade? What is the better route for sustainable growth of Indian nominal GDP (not in terms of PPP) to reach the target of becoming 3rd largest economy in the world "
I am opening the following question for blog discussion for participation by all. Meaningful answers will carry marks out of 3. The blog discussion opens tomorrow evening from 6-00 PM (14-03-17) and closes on 9-00 PM on 17-0-17.
Please note the following
a. Answers/arguments/comments should not exceed 20 lines per person.
b. One student can participate only once in this discussion. Multiple participation will be acceptable but evaluation is only done for the best comment.
c. As the topic doesnot have a straight forward answer please understand/reserach the topic fully and carefully before you answer. it is a must that you should give references justifying your view point.
e. Maximum marks a student can get is limited to 3 only
f. No posts before and after the timings will be eligible for evaluation.
Discussion Topic: "FDI or International Trade? What is the better route for sustainable growth of Indian nominal GDP (not in terms of PPP) to reach the target of becoming 3rd largest economy in the world "
india is classified as a newly industrialised country, and one of the G-20 major economies, with an average growth rate of approximately 7% over the last two decades.FDI is an important vehicle of technology transfer from developed countries to developing countries. The contribution of FDI to economic growth is enhanced by its positive interaction with human capital.The stock of human capital in a host country is important for absorbing foreign knowledge.Higher the level of human capital in host country, higher the effect of FDI on country's economic growth.
ReplyDeleteInternational trade is also known to be an instrument of economic growth.Trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them.
lowering the Inflation rate, tax burden, and government consumption would advance economic growth in developing countries.
positive interaction between FDI and international trade in promoting sustainable growth of Indian nominal GDP. FDI always brings certain benefits to national economies. It can contribute to Gross Domestic Product, Gross Fixed Capital Formation and balance of payments. There have been empirical studies indicating a positive link between higher GDP and FDI inflows. FDI can also contribute toward debt servicing repayments, stimulate export markets and produce foreign exchange revenue. Foreign direct investment (FDI) is increasingly being recognized as an important
factor in the economic development of countries.FDI in India also helped the company in gaining local human resources and cheap labour costs. In India they also benefited by increasing demand of growing Indian economy and people interest of having car in their property base.Hyundai motors huge success in India also rooted into the fact that India is proved to be one of the most convenient
place for investing specially considering its very bright future prospects and un-served market to capture.
kavali.manikanta
161323
source:http://citeseerx.ist.psu.edu
ReplyDelete
India had the distinction of being the world's largest economy in the beginning of Christian era, as it accounted for about 32.9% share of world GDP and about 17% of the world population. The goods produced in India had long been exported to far off destinations across the world. Therefore, the concept of globalisation is hardly new to India.
ReplyDeleteIndia currently accounts for 2.7% of World Trade (as of 2015), up from 1.2% in 2006 according to the World Trade Organisation (WTO). Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.
India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since liberalisation, the value of India's international trade has become more broad-based and has risen to 63,0801 billion in 2003–04 from 12.50 billion in 1950–51. India's trading partners are China, the US, the UAE, the UK, Japan and the EU. The exports during April 2007 were $12.31 billion up by 16% and import were $17.68 billion with an increase of 18.06% over the previous year.
India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor, the World Trade Organisation. While participating actively in its general council meetings, India has been crucial in voicing the concerns of the developing world. For instance, India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies.
Despite reducing import restrictions several times in the 2000s, India was evaluated by the World Trade Organisation in 2008 as more restrictive than similar developing economies, such as Brazil, China, and Russia. The WTO also identified electricity shortages and inadequate transportation infrastructure as significant constraints on trade. Its restrictiveness has been cited as a factor which has isolated it from the global financial crisis of 2008–2009 more than other countries, even though it has reduced ongoing economic growth
s.prashanth
161151
According to me i think FDI is a vague indicator which always cannot be an indicator for indian nominal gdp growth so international trade is better route than or compared to FDI for India nominal gdp to reach target . so finally i suggest international trade.
ReplyDeleteLikitha
161106
Foreign direct investment and trade are often seen as important catalysts for economic growth in the developing countries. FDI is an important vehicle of technology transfer from developed countries to developing countries .FDI also stimulates domestic investment and facilitates improvements in human capital and institutions in the host countries. International trade is also known to be an instrument of economic growth. Trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them.
ReplyDeleteEven though past studies show that FDI and trade have a positive impact on economic growth, the size of such impact may vary across countries depending on the level of human capital, domestic investment, infrastructure, macroeconomic stability, and trade policies. The literature continues to debate the role.
Hence i feel that FDI is the better route for the economic growth of our country and to become the 3rd largest economy in the world but along with some restrictions where we can protect ourself(INDIA) from the negative aspects of FDI.
India is far off from even average high middle income countries, leave alone the developed countries.
ReplyDeleteSome scholars argue that India, with its recent stellar growth performance, will soon outpace China.
Even assuming a long-term growth rate of per capita income of 4.5 per cent per annum for China, and 8 per cent for India, the outcomes are as follows: for per capita income in nominal GDP, India compared to China would take till 2043 to reach just half way of China.
India, in 2043, would have GDP PCI of $14,730 while China would be at $28,399.
To fully catch up with China, India would take up to 2063, when China would be at $68,492 and India at $68,658.
India in 2019 would have PPP PCI of $8,334 while China would be at $16,516.
To fully catch up with China, India would take up to 2040, when China would be at $41,626 and India at $41,952.
China can always grow faster, and sustaining 8 per cent PCI growth for close to three to five decades would be a phenomenal achievement for India, without a parallel in history.
The Chinese reforms were carried out in the late 1970s as against India's in 1991.
People living below the poverty line is only 12.7 per cent of the total population in China, as against about 30 per cent in India.
China's share of trade to GDP is 45 per cent as against India's 32 per cent.
Tax revenue as a percentage of GDP is 14.4 as against India's 10.8.
India cannot achieve high sustained growth with declining or stagnant exports, and hesitant integration into the global economy.
India's size, demographics and economic resources make it a natural candidate for being one of the major global economic players.
The prime minister's "Make in India" initiative offers a good opportunity for India being a major global player, if we move quickly from slogans to 21st-century trade and investment reforms
161127
K.Abhinay
Although the growing economic stature of China and India is widely recognized, the factors underlying their success are still not well understood.
ReplyDeleteTo appreciate the long-term potential of China and India, we need to take a comprehensive look at their innovative capacity.
China and India are the two most populous countries, accounting for 20.4% and 17.0% of the world's population.
Although they are still developing countries with per capita incomes of just $1,740 and $720, they already are the fourth and eleventh largest economies in the world at nominal exchange rates.
They are growing more than three times faster than the world average.
Innovation in China and India should be understood to include not just knowledge that is new to the world, but also knowledge that is new to these countries.
It is important to consider this second dimension of innovation because it helps to understand why these economies are growing so fast and how rapidly they are likely to grow in the future.
161220
K.Bhavya chand
The economic development of a country is based on its Industries Revolution with more production and promotion (Less Import and more Export of Product ) which are mostly possible through the revolution of agriculture, industries etc. in many sectors . The developments are easily possible when Foreign Direct Investment (FDI) exists. It is an important source of Economic development in India, because it helps to bring close the different economies of the country by investing capital through FDI in various resources like manufacturing, infrastructure, transport, technology, services, productivity and hospitality etc. At the same time international trade also plays a key role in development of a country.Foreign trade provides foreign exchange which can be used to remove the poverty and other productive purposes, increases the scale of production and national income of the country to meet the foreign demand we increase the production on large scale so GNP also increases.so in my perception both FDI and international trade are equally important for growth of a country like India.
ReplyDeleteCH.DEEPIKA
161112
This comment has been removed by the author.
ReplyDeleteForeign Direct Investment is the major route for sustainable growth of India's GDP compared to Foreign trade because majority of Foreign Trade of India includes imports than exports which results in decrease in GDP. The major exports that are done by India are mineral fuels(refined/unrefined), Gold(finished, metal). India imports many products/services from Foreign countries like China, USA etc. Chinese products are highly sold in India because most of the indians are price conscious.
ReplyDeleteIf Foreign Direct Investment is increased in India then many manufacturing units will be established and India becomes a global manufacturing hub which results in increase in exports and which ultimately results in increase in GDP. Thus for the increase in GDP of the country first manufacturing units are necessary and for that investment is necessary and hence FDI is the better route which gives sustainable growth to India's GDP.
U.SRUTHI
161247
1.According to United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2016, India acquired 10th slot in the top 10 countries attracting highest FDI inflows globally in 2015.
ReplyDelete2.India will require around US$ 1 trillion in the 12th Five-Year Plan (2012–17), to fund infrastructure growth covering sectors such as highways, ports and airways. This would require support from FDI flows. India’s growth rate, along with competitive location in terms of wages and policies like Stand Up India, is expected to boost FDI in the coming future.
3.Ford Motor Co. plans to invest Rs 1,300 crore (US$ 189.2 million) to build a global technology and business centre in Chennai, which will be designed as a hub for product development, mobility solutions and business services for India and other markets.
4.The Economy of India is planning to reach its target to be world’s 3rd largest economy by 2020, According to me, Both FDI and Foreign Trade are often important catalysts for growth of Indian nominal GDP.
According to me International trade is the better route for sustainable growth.
Vallabhaneni.Nihar
161349.
http://www.ibef.org/economy/foreign-direct-investment.aspx
According to my view F.D.I is the best route for sustainable growth of Indian nominal GDP. we are rich in natural resources but we dont have proper idea to in-cash these resources efficiently. So by welcoming F.D.I we are not only receiving capital but also receiving technology,idea and so on. if we see the otherside of our economy then we will understand that our economy growing but not in a uniformed manner because their is a huge income distribution and unemployment. so fdi will also held in generating employment further. And if in an economy like INDIA their is a overall growth then definitely it can reach the target of becoming 3rd largest economy in the world.
ReplyDeleteGovernment of India also accepts the key role of FDI in economic development not only as an addition to domestic capital but also as an important source of technology and global best practices. The Government of India has put in place a liberal and Transparent FDI policy.
Sourav Banerjee
161150
India's economy is forecast to expand at a faster pace in the full year to March,although gross domestic product growth slowed in the fiscal third quarter.
ReplyDeleteReserve Bank of India governor Raghuram Rajan warned last month that deviating from the fiscal consolidation road map may lead to potential loss of government credibility and is unlikely to stimulate growth.
The new GDP series based on value added data released last year has been facing criticism from both policy makers and private economists who complain that it portrays an overtly robust picture of the Indian economy while other macro indicators such as bank credit growth, rural demand and factory output do not support such a depiction.
"The private corporate sector growth as estimated from available data of listed companies was 9.9% at current prices in April-December 2015-16.
The surprisingly robust pickup in manufacturing growth in the third quarter belies the trends available from various high-frequency, volume-based indicators, including the IIP.
Private consumption growth was surprisingly project"Underlying direction of GDP growth projection for FY 16 is very positive. Manufacturing growth is good signal for Make in India at 7.6% during the financial year from 6.2% a year ago, mostly supported by urban demand and despite a rural slump.
"Underlying growth drivers need to be rekindled to place the economy a higher growth trajectory. The revival of private investment, in particular, has a crucial role, especially as the climate for business improves and fiscal policy continues to consolidate." RBI said the Indian economy is currently being viewed as a beacon of stability because of the steady disinflation, a modest current account deficit and commitment to fiscal rectitude.
R. Chiranjeevi
161457
This comment has been removed by the author.
ReplyDeleteForeign direct investment is an investment made by a foreign individual or company in productive capacity of another country. It is the movement of capital across national frontiers in a way that grants the investor control over the acquired asset.
ReplyDeleteApart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment.
so, FDI is the better route for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy in the world.
M. Srilekha Reddy
161137
According to me FDI is the best way for sustainable growth of our country compared to international trade.
ReplyDeleteForeign direct investment inflows into India in 2016 calendar year jumped 18% to record $46.4 billion at a time global FDI inflow fell.
At an institutional level, the growing importance of FDI, coupled with the absence of binding multilateral rules on national policies towards FDI, has created what in many quarters is viewed as an obstacle that could slowdown the pace of further integration of the world economy.
Foreign direct investment is also viewed as a way of increasing the efficient with which the world's poorest countries.
As international trade includes more amount of investment and always trade relations might not be good, but not in the case of FDI because during the first few decades. India's policy towards FDI or any foreign capital remained highly restrictive, as a part of its stringent licensing rules, tariffs, import-substitution policy and various other rules and regulations. the abolition on patent rights on certain products in industry also severely curtailed intellectual property rights due to which FDI was opposed for preferential technical collaboration aggrements. FDI is now permitted up to 51% ownership and 100% on a case- by case basis in some priority areas like pharmaceuticals, airports, hotels etc..
FDI plays a major role in development of a developing country India is a country with the large population. poverty, unemployment are some major problems and I think through FDI , it would be beneficial for us to eradicate such problems. Also through FDI new technologies better foreign relationship are maintained.
Sai Venunadham - 161340
Either FDI or International trade alone won’t give sustainable growth to the country. We need both FDI in INDIA and International trade, these combinedly can give a better economic growth as well as hope of better opportunities for even better growth consistently. FDI should be allowed in India with certain restrictions for protecting our own Business. And International trade also good for competitiveness among the countries in terms of Growth.
ReplyDeleteIn my view, with the Combination of FDI and INTERNATIONAL TRADE, INDIA can reach the target of becoming 3rd largest economy in the world
FDI is the best way for sustainable growth of our country compared to international trade, as international trade includes more amount of investment and always trade relations might not be good, but not in the case of FDI because During the first few decades, India’s policy towards FDI or any foreign capital remained highly restrictive, as a part of its stringent licensing rules, tariffs, import-substitution policy and various other rules and regulations. The abolition on patent rights on certain products in industry also severely curtailed Intellectual Property Rights, due to which FDI was opposed for preferential technical collaboration agreements. FDI is now permitted up to 51% ownership and 100 % on a case-by-case basis in some priority areas like pharmaceuticals, airports, hotels etc. Technology Policy is also reformed for greater recognition to IPR procedures to further simplify the flow of FDI.
ReplyDeleteAccording to me FDI plays a major role in the development of a developing country. India is a country with the large population. Poverty, unemployment are some major problems and l think, through FDI, it would be beneficial for us to eradicate such problems. Also through FDI, new technologies, better foreign relationship are maintained. So, its important to go in favor of FDI
Sandeep Reddy
161429
According to me both FDI and International Trade is the better route for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy in the world, because when we see international trade our exports and imports contributing to the GDP is 19%. We are at 19th position in exports and 11th position in imports. China’s gdp contribution exports and imports is 22.1, but here we see china at 1st place in exports 3rd place in imports so here international trade plays key role in contributing to the GDP. FDI also better route for sustainable growth of Indian nominal GDP because we are rich in natural resources but we need proper investments or capital and export more then it is automatically contributing high % GDP. So both FDI and International trade is the better route for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy.
ReplyDeleteAccording to me FDI is the better route for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy in the world ".because when we see international trade our exports and imports. We are at 19th position in exports and 11th position in imports. Other part is developed countries like China, USA, Japan they are at top position in exports.so we welcome FDI and investing more in India we export more reach the higher ranking in exports and reach the 3rd largest economy
ReplyDeleteAccording to me FDI is the best way for sustainable growth of our country compared to international trade.
ReplyDeleteForeign direct investment inflows into India in 2016 calendar year jumped 18% to record $46.4 billion at a time global FDI inflow fell.
The keen interest in FDI is also part of a broader interest in the forces propelling the ongoing integration of the world economy, or what is popularly described as “globalization”. Together with the more or less steady rise in the world's trade-to-GDP ratio, the increased importance of foreign-owned production and distribution facilities in most countries is cited as tangible evidence of globalization.
Foreign direct investment is also viewed as a way of increasing the efficiency with which the world's scarce resources are used. A recent and specific example is the perceived role of FDI in efforts to stimulate economic growth in many of the world's poorest countries.
At an institutional level, the growing importance of FDI, coupled with the absence of binding multilateral rules on national policies toward FDI, has created what in many quarters is viewed as an obstacle that could slowdown the pace of further integration of the world economy.
Renewed interest in FDI within the trade community has been stimulated by the perception that trade and FDI are simply two ways - sometimes alternatives, but increasingly complementary - of servicing foreign markets, and that they are already interlinked in a variety of ways.
J.Sushma
161319
The role of foreign direct investment (FDI) in the growth process has been a debatable issue in the transitional as well as developing economies like India. Low technological base of production is another factor impinging upon growth of developing countries. In this context FDI may mitigate these constraints to growth to some extent. FDI brings capital with foreign technology, modern managerial techniques and organizational structures (Prakash and Balakrishnan, 2006). The extent of openness of an economy is conventionally measured in terms of the trends in international flows of capital in the form of FDI and volume of trade in terms of both exports and imports. In this context the relationship between inward FDI and international trade is important for development and planning strategies of the developing countries. The possible linkages between FDI and international trade in the literature of international economics are discussed by two aspects, one is whether FDI is a substitute for or a Complement to international trade and another is whether FDI causes international trade or vice-versa
ReplyDeleteScenario of FDI inflow and foreign trade in India:
Inflow of FDI had started slowly in India following economic reform and which was very low after the process of liberalization. Because of limited and restricted opening up policy, the FDI inflow was within the range of just less than US$ 1 billion till 1994-95 in India. After that it was gradually gaining its momentum and due to further impetus to the process of economic reform, it has doubled in 2002. Because of the sector specific and target oriented FDI policy intervention by the government of India, the actual remarkable growth has occurred during the last decade. With the emergence of the Indo-centric regional trade agreements (RTAs) and further economic reforms, India has observed an unprecedented
level of FDI inflow afterwards, taken the corresponding figure to US$ 19.73 billion during 2005-06 to 2009-10. Different measures of capital account reform have been undertaken over the period, which considerably liberalized FDI inflow in India. However, owing to indirect taxes and transportation infrastructure FDI inflow in India has been lower vis-a-vis the experiences in China (Shah and Patnaik, 2005).
Ravi Sameer
161439
This comment has been removed by the author.
ReplyDeleteFDI is a key factor in sustained economic growth may provide an incomplete picture. Also the arguments put forth by the environmentalists against the very concept of privatization of the atmospheric commons that allows the market and corporate actors to determine the pace and development of the ‘carbon market’; cannot be overlooked. The neoliberal economic paradigm on which carbon trading is based is fatally flawed and rewards polluters by bestowing tradable property rights on them in an arbitrary, unequal fashion. Carbon Trading is worse as trading in emissions effectively creates a commodity literally out of thin air; unlike markets that trade in tangible commodities, this one trades in the absence of something no one wants: greenhouse gases in the atmosphere. Pollution rights promote rent-seeking rather than purposive action to reduce emissions through material or energy saving and reducing fossil 66 Annual Research Journal of SCMS, Pune Vol. 1, Jan. 2013–Jan. 2014 fuel dependence. Worse, they inhibit serious innovation and structural change while rewarding superficial, paltry “end-of-pipe” solutions. Governments have created this network to promote and protect foreign investment. These agreements respond to investors’ requests, and provide a valuable tool to attract desirable inward FDI. Investing abroad inevitably carries increased political and economic risks, particularly when an investment involves large sunk costs or a long-term commitment of capital. As outward FDI from Asia turns increasingly toward developing countries with less stable legal and judicial frameworks, the risks associated with foreign investment increases in India. And in an era of capital shortage, investment destinations will compete to obtain the most desirable investment projects.
ReplyDeleteForeign Direct Investment is the major route for sustainable growth of India's GDP compared to Foreign trade because majority of Foreign Trade of India includes imports than exports which results in decrease in GDP.The extent of openness of an economy is conventionally measured in terms of the trends in international flows of capital in the form of FDI and volume of trade in terms of both exports and imports. In this context the relationship between inward FDI and international trade is important for development and planning strategies of the developing countries. The possible linkages between FDI and international trade in the literature of international economics are discussed by two aspects, one is whether FDI is a substitute for or a Complement to international trade and another is whether FDI causes international trade or vice-versa.
ReplyDeleteTherefore for the increase in GDP of the country its important that investments are made, hence FDI is the better route which gives sustainable growth to India's GDP.
Suman Sharma
161244
While compared to International trade FDI acts better in the development of the economy because.It acts as a long term source of capital as well as a source of advanced and developed technologies. The investors also bring along best global practices of management. As large amount of capital comes in through these investments more and more industries are set up. This helps in increasing employment. FDI also helps in promoting international trade. This investment is a non-debt, non-volatile investment and returns received on these are generally spent on the host country itself thus helping in the development of the country.
ReplyDeleteApart from being a critical driver of economic growth,FDI is a major source of non-debt financial resource for the economic development of India. Foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment,hence FDI stands front in the development of the economy.
Sai Sandeep
161434
FDI always brings certain benefits to national economies. It can contribute to Gross Domestic Product, Gross Fixed Capital Formation and balance of payments. There have been empirical studies indicating a positive link between higher GDP and FDI inflows. FDI can also contribute toward debt servicing repayments, stimulate export markets and produce foreign exchange revenue. Foreign direct investment (FDI) is increasingly being recognized as an important
ReplyDeletefactor in the economic development of countries. FDI is now permitted up to 51% ownership and 100% on a case- by case basis in some priority areas like pharmaceuticals, airports, hotels etc..
K. Narendra Reddy 161326
How is that a student of Section-A could comment in Sec-C blog
DeleteFor developing country like India fdi would be the bettef option we nerd to develope a lot in infrastucter technology ,innovation these are according to wef(world economic forum) to ipmrove this basic things we need capital so fdi would be the better as of now to improve our gdp.later on we can go for international trade as of current situation our exports are less and imports are more it cannot be changed overnight in gdp.fdi are only key change in gdp as govt is more aggressively campaining the make in India and many other reforms are brought by the govt to attract fdi's in to the country
ReplyDeleteNavaneeth
161147
FDI is better route for sustainable growth of Indian nominal GDP because we are rich in natural resources but we need proper investments or capital and export more then it is automatically contributing high % GDP. So both FDI and International trade is the better route for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy
ReplyDeleteFdi is better, but certain conditions should imposed and most of them have to work under India that makes good employment opportunities,trade competition,import of technology. It makes a globalization of countries and maintain strong relations.where as in international trade our goods and services are given importance and also income stays with our country but takes a long time to develop.At present our make in India concept also works a lot with good startups.so both contribute to India in development.
ReplyDeleteThe economy of India is the seventh-largest in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP).It makes a globalization of countries and maintain strong relations.where as in international trade our goods and services are given importance and also income stays with our country but takes a long time to develop. International trade is also known to be an instrument of economic growth.Trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them The contribution of FDI to economic growth is enhanced by its positive interaction with human capital.The stock of human capital in a host country is important for absorbing foreign knowledge.Higher the level of human capital in host country, higher the effect of FDI on country's economic growth.FDI always brings certain benefits to national economies. It can contribute to Gross Domestic Product, Gross Fixed Capital Formation and balance of payments. There have been empirical studies indicating a positive link between higher GDP and FDI inflows. FDI can also contribute toward debt servicing repayments, stimulate export markets and produce foreign exchange revenue. Foreign direct investment (FDI) is increasingly being recognized as an important factor in the economic development of countries.FDI in India also helped the company in gaining local human resources and cheap labour costs.
ReplyDeleteIndia is a developing country with the enormous population, to develop the country we have to ensure that everything right from infrastructure, healthcare, education, employment and many more should also develop
ReplyDeleteIndia is a country which has more imports than exports, which results to more expenditure and less revenue, till now in the country FDI has added a great value to the economy of the country
FdI has been helping india in increasing employment, technology, infrastructure and more. In my opinion for a sustainable growth the foriegn trade will not be helpful for the country because of the huge gap between imports and exports, FDI has a positive impact, it inflow supplements domestic capital, as well as technology and skills of existing companies. It also helps to establish new companies. All of these contribute to economic growth of the Indian Economy
in a long term perspective FDI route helps to strengthen the Indian economy
FDI has been viewed as an accelerator of host countries' economic growth. One of its major potential growth-contribution is to promote host countries' exports. The estimates indicate that FDI indeed has a positive impact on India's export boom; its effects are much larger than those of domestic capital. FDI improve the productivity growth through various means, like enabling the adoption of foreign technologies, resulting in greater
ReplyDeleteBy means of increasing exports: India can follow China in this regard. India can devalue its currency and make itself more competitive in the global market by supplying quality products at economical rate to the foreign country. However, this can backfire because then India needs to pay much more rupees for its imports of oil and essential commodities. Moreover currently the economic environment is not conducive to follow this approach because of weak demand.
By focus on improving domestic demand: India’s economic growth is mainly powered by domestic demand. And this demand is very much resistant to outside world. India can focus on getting more and more people under the poor income category to higher level of income. This will not only boost demand hugely but will have a multiplier effect much more compared to 1.This is because people with less income usually tend to spend more on consumption.
Presently, the GDP of India is 6.3% and is expecting GDP to grow at 7.1 per cent year-on-year in 2017-18. To reach the target, both FDI and Trade are important. Foreign direct investment and trade are often seen as important catalysts for economic growth in the developing countries. FDI is an important vehicle of technology transfer from developed countries to developing countries. FDI also stimulates domestic investment and facilitates improvements in human capital and institutions in the host countries. Trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them. For example, Narendra Modi is encouraging 100% FDI in India in some sectors which may improve the economy further. According to the study, Using cross-section data relating to a sample of 66 developing counties over three decades, we show that FDI and trade contribute toward advancing economic growth in developing countries. There is a strong, positive interaction between FDI and trade. FDI is often the main channel through which advanced technology is transferred to developing countries. The results imply that the benefits from such investment would be greatly enhanced if the host country has a better stock of human capital. It also shows that FDI stimulates domestic investment. Sound macroeconomic policies and institutional stability are necessary preconditions for FDI-driven growth to materialize. The results imply that lowering the inflation rate, tax burden, and government consumption would advance economic growth in developing countries. For example, market reforms in host countries could increase both GDP growth rates and the inflow of FDI simultaneously. The trade and employment effects of outward FDI on the country of origin economies depend considerably on the motivations and type of investment abroad and this applies to developing-country FDI as well.
ReplyDeleteSo, in my opinion both FDI and Trade are important for sustainable growth of Indian nominal GDP to reach the target of becoming 3rd largest economy in the world.
https://jgea.org/resources/download/2595.pdf
http://www.ipe.ro/rjef/rjef4_09/rjef4_09_9.pdf
ABHISHEK JAIN
161102
The discussion is declared closed and no m ore comments after this post will be eligible for evaluation.
ReplyDelete