FDI Flow's into Indian Economy-A Critical Evaluation

Perhaps the most sensitive area in International Economics today is Foreign Direct Investment (FDI). The developed countries like United States America (USA) United Kingdom (UK), etc. try to restrain FDI by companies domiciled within their borders, in order to limit the pressure on their Balance of Payments (BOP). Other countries like Canada and Japan seek to limit Foreign Investment within their borders lest their control over domestic resources should be diluted by foreign ownership. Developing countries worry both that the foreigners will invest in them and that they won’t. They fear exploitation on one hand and inadequate access to foreign capital and technology on the other. Prohibitions and restrictions are laid down against investment in certain lines of activity which are regarded as peculiarly vulnerable to foreign influence and as particularly wasteful. Hence each developing country insists on the foreign investor for honoring certain conditions like local content requirements, export requirements, trade balance requirements, local equity requirements, limitations on remittance of profits and barriers to entry in certain sectors. These restrictions are justified on the gr