Prospects for foreign direct investment in the nineties

Abstract

FDI into India is more likely to take the form of joint-ventures and other so called ynon-equityz forms. As indigenous businesses have gathered strength over the period of sheltered growth in the eighties (and even earlier), FDI entry into India would rarely be without an active Indian collaborator. FDI has had little role to play in the manufactured exports growth from most of the NICs, and their role in India is likely to be even less significant. Yet other foreign firms (like retail chain stores in the West, the Shogo Shosho of Japan) and transnationals too, have, to the great benefit of LDC firms sourced manufactured items from them, the LDC firms having acted as subcontractors or as OEM suppliers. Given the wide diversification of the economy, the low cost of manpower, availability of a wide variety of skills, and large excess capacities, subcontracting and OEM relationship in manufacturing can provide the crucial economies of scale, and steady market to segments of Indian manufacturing which are most competitive, even if at low margins, so that a significant contribution to the extensification of growth can be made.