Foreign Direct Investments From India : 1964-83

This paper is based on the EXIM Bank International Trade Research Annual Award 1990 doctoral thesis "Foreign Direct Investments From India: 1963-83". It brings out the trends in direct foreign investments over the period, the patterns of ownership and control, the sources of technology of the FDI firms abroad, the sectoral and country distribution of outward FDI, and the factors that underlie the flow of these investments. The strengths and weaknesses of these investments are brought out. Indian outward FDI, i.e the fact that an economy at an early stage of industrialization has become a significant exporter of capital and technology (relative to investments within the economy) is interesting and not easily understood without bringing in the peculiar features of the home economy, viz. that capital accumulation and growth of the private corporate sector is restricted for structural reasons, and perhaps also due to policy reasons. Monopolistic structures, reinforced by policies such as industrial licensing in very many sectors has prevented the competition between capitals, which could have contributed to the growth of the home market. The small and slowly growing home market explains not only the industry patterns and the time pattern of FDI from India, but also certain other characteristics - that many of them are early entrants into host countries and are market seeking rather than market protecting, and hence quite different from advanced country FDI or even Korea which is well on its way to industrial transformation. India also shows much resources seeking investments, which can be expected to increase as growth places demands on India's limited natural resources