FDI - A way to Economic Development in Post-Globalization Era

Abstract

One of the ways to bring a change in management process and to bring a change towards the development of economy and business as a whole is through attracting Foreign Direct Investment. India being a demand driven economy, according to Keynesian theory, an increase in aggregate demand due to induced investment would lead to an increase in the national income and would thus lead to the overall development of the economy. It would further help in the generation of employment and would also result in the learning of a lot of innovative ways of managing business from the global giants like Walmart, Tesco, Carrefour etc. In this era of globalization, external sector vulnerabilities are also affecting Indian economy because of the rapid globalization of economy. In such a situation of uncertainty and low investment, encouraging FDI would stabilize the capital account deficit (CAD) and the economic position of the country. However western countries and Latin American countries including Brazil, Argentina, Uruguay and Colombia, where the corporate retailers control the entire supply chain of food and farmers had no alternatives but to sell to the selected corporate giants at the prices offered by them, witnessed a failure of FDI. Thus, the success of FDI in a country like India requires a strong control on part of government along with transparency in its functions and policy making so that the FDI can effect our economy only positively.