Impact Of Foreign Direct Investment On Indias Exports

Abstract

Globalization had major impact on overall trade of the Indian economy. The easy going and conservative attitude of the policy makers in India were shaken by the 1990-91 crisis. The New Economic Policy of the nineties aimed at opening up the economy, to encourage free trade and competition and reduce the role of government in foreign trade matters. Restrictions on international trade were removed, foreign investments were allowed and a new Liberalized Exchange Rate Management System (LERMS) was introduced to reap the benefits of competition and counter the disadvantages of an inward looking trade policy. Enabled by increasingly liberal policy frameworks, made possible by technological advances, globalization more and more shapes today's world economy. Global trade and foreign direct investment, the two main drivers of this process have undergone a tremendous change during the last two and a half decades. There have been marked shifts in their flows, destinations, determinants and policies. In this process, developing countries have found their economic activities being increasingly internationalized. FDI by TNCs (Transnational Corporations) now plays a major role in linking may national economies, building an integrated international production system the productive core of the globalized world.