FDI Inflows - An Appraisal:
A comparison of the magnitude of FDI inflows received by India would appear too small, especially when compared to the inflows received by other countries in the region such as China (around $50 billion in recent years). But taking a ratio of FDI to GDP, however, narrows down this difference. The industrial growth seems to signal the prospects of the economy to the foreign investors. However, policy liberalisation may at best be viewed as a necessary but not a sufficient condition for FDI inflows. This is because studies have found that only a part of the increase in FDI inflows could be attributed to liberalisation. A significant part of the kse was found as due to a sharp expansion in the global scale of FDI outflows during the 1990s. Moreover, the decline in inflows of FDI since 1997 suggest that policy liberalisation is not an adequate explanation of FDI inflows.