Regional Economic Imbalances: Business and Foreign Direct Investment in India

Regional Economic Imbalances: Business and Foreign Direct Investment in India

Jitender Bhandari, Manmohan Rahul, Shalini Rahul Tiwari
Copyright: © 2015 |Pages: 16
DOI: 10.4018/978-1-4666-8259-7.ch001
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Abstract

The importance of inflow of Foreign Direct Investment (FDI) in economic development of India is widely known, analyzed and well accepted in the post-liberalization era. But such inflows have created regional disparities within India owing to their concentration in select geographical locations (states) only. This should be brought into socio-economic discourses and policy formulation and as such, this chapter is an attempt to understand the linkage between FDI and regional economic growth of India. The chapter is divided into three parts.Part-1presents phases of evolution of FDI policies that made an impact on the business condition in India post independence,Part-2presents economic condition of various states and also discusses the FDI inflows to these states since 1991.In Part-3, some policy measures has been suggested to remove this anomaly in our development process so as to make economic development with FDI more stable and inclusive.
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1.0 Introduction

In economic theory and academic discussion, FDI has a positive relationship with economic growth has been validated. Post 1950, MNC and international trade increased dramatically in all continents and India being no exception invited foreign capital in various forms and sizes. Post 1991, India witnessed significant amount of FDI inflows in few of its States and Union Territories and consequently showed better growth prospects. It also raised issues like regional disparity and economic imbalance among the states because of FDI accumulation in few states. An attempt has been made in the present chapter to understand this relationship. The chapter is divided in three parts where Part 1 is an overview of FDI policies post, Part II, discusses the economic condition of various States and then an attempt has been made to understand the relationship between FDI and regional economic development. The policy measures have been discussed in Part-3 of the paper.

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