The Malaise of Cor­rup­tion Fac­ing the so­ci­ety

- Shakti Singh & Geeta Rani

Economic Challenger - - NEWS - *Shakti Singh ** Geeta Rani

*As­sis­tant Pro­fes­sor, Deptt. of Com­merce, M.D.U. Ro­htak. ** As­sis­tant Pro­fes­sor, M.K.J.K. Col­lege, Ro­htak.

AB­STRACT Cor­rup­tion is preva­lent in ev­ery walk of life in In­dia which has made huge dam­age to the dif­fer­ent struc­tures of the na­tion. Of course, it is a world-wide phe­nom­e­non. It has ex­isted for ages. The ba­sic ob­sta­cle of or­ga­ni­za­tional, so­cial, po­lit­i­cal and eco­nomic progress is cor­rup­tion. There is a high NEG­A­TIVE cor­re­la­tion be­tween eco­nomic growth and cor­rup­tion. Some­times it is a stum­bling block in the progress of the na­tion. In­dia is fac­ing a para­dox­i­cal sit­u­a­tion i.e. ris­ing In­dia, shin­ing In­dia, inclusive growth, au­to­cratic mar­ket, haves and have nots, ris­ing cor­rup­tion, starv­ing peo­ple, un­der­nour­ished chil­dren and mothers etc, rep­re­sent a para­dox­i­cal sce­nario. The pa­per aims at throw­ing light on dif­fer­ent forms of cor­rup­tion like po­lit­i­cal, eco­nomic, moral, so­cial and or­ga­ni­za­tional and pro­vid­ing sug­ges­tions to tackle it.

Key­words: Cor­rup­tion, Struc­ture, Eco­nomic growth


The ex­am­i­na­tion of jus­ti­fi­ca­tion for vari­ances in wealth and poverty among na­tions is an ul­ti­mate ques­tion in eco­nomic and po­lit­i­cal in­quiry. Poverty en­com­passes a range of is­sues, in­clud­ing health, hous­ing, ed­u­ca­tion, nu­tri­tion and life ex­pectancy and across all per­spec­tives through­out the du­ra­tion of life. If we look for the rea­son of th­ese vari­ances then the word

'Struc­tural 'Struc­tural Vi­o­lence' Vi­o­lence' orig­i­nates some­where. The word vi­o­lence means 'in­tense force' or 'un­war­ranted ex­er­tion of force or power'. Vi­o­lence can be an un­sat­is­fac­tory ac­cess to re­sources, po­lit­i­cal power, ed­u­ca­tion, health care and so­cial sys­tems. Struc­tural Vi­o­lence means any con­straints or vi­o­lence caused by so­ci­etal, po­lit­i­cal, eco­nomic and le­gal mech­a­nisms. But this type of vi­o­lence is of­ten over­looked. This sit­u­a­tion leads to an econ­omy to an im­bal­ance be­tween what the coun­try, a per­son, a re­gion pro­duces and what is re­ceived in re­turn. The fail­ure to at­tain national wealth and poverty is ba­si­cally the re­sult of this type of su­per­flu­ous ef­fort of power that of­ten leads to un­nec­es­sary con­trol and re­sult­ing into high cor­rup­tion. So, Struc­tural Vi­o­lence in­di­cates cor­rup­tion some­where. Fur­ther, Cor­rup­tion not only causes poverty alone but also af­fects the fi­nan­cial mar­ket, for­eign di­rect in­vest­ment, so­cial jus­tice, em­ploy­ment, eco­nomic growth, spir­i­tual and re­gional bal­ances etc. There are many dif­fer­ent ways in which cor­rup­tion can be de­fined but the best op­er­a­tional def­i­ni­tion is an “ac­com­plish­ment of a pub­lic rep­re­sen­ta­tive for pri­vate gain”.

Wald­man (1974), de­fined cor­rup­tion in the senses of “pub­lic of­fi­cials who mis­use their au­thor­ity, power or po­si­tion and as a re­sult vi­o­late some ex­ist­ing le­gal norms of its coun­try. Th­ese cor­rupt acts are usu­ally done in se­cret and for per­sonal gain in wealth, sta­tus, fam­ily, friends or re­li­gious groups”. Cor­rup­tion can be classifieds in dif­fer­ent classes such as:

Po­lit­i­cal (bribe taken by govern­ment of­fi­cials and bu­reau­crats, ex­ces­sive power used for

per­sonal gain, il­le­gal prop­erty and money in leader's ac­count, nepo­tism, abuse of power, ex­tor­tion etc.)

So­cial (crime, greed, power, rob­bery, urge for lux­ury, bribe, ego­is­tic at­ti­tude among in­di­vid­u­als, con­flict of in­ter­est etc.)

Cor­rup­tion among or­ga­ni­za­tions (tak­ing and giv­ing bribe to main­tain the projects, il­licit gain, un­ex­pected wages, wipe out im­por­tant in­for­ma­tion, tax eva­sion, non-dis­clo­sure prac­tices, ex­treme wastage of re­sources, money laun­der­ing, white col­lar crime etc.)

Moral (spir­i­tual, ethics, soul, hu­man na­ture, hon­our etc.)

Eco­nomic (unequal or less al­lo­ca­tion of re­sources in goods and ser­vices, black money, charge ex­tra money from con­sumers, in­sider trad­ing etc.)

Pas­cal (1962) , stated that to­day the sit­u­a­tion of cor­rup­tion aris­ing more and more only be­cause hu­man be­ing has lost the pres­ence of god. Pas­cal rep­re­sents cor­rup­tion as the fall of hu­man­ity. So, to­day cor­rup­tion can't be de­fined only to the “bribe given to govern­ment” which is a com­mon in­ter­pre­ta­tion. The out­comes of cor­rup­tion may be as­so­ci­ated with less taxes, loss of rev­enue, lack of in­vest­ment, loss of faith in law, de­cline in life ex­pectancy and growth of poor peo­ple etc.


Ev­ery day, most of us must have been an eye­wit­ness to or a vic­tim of the cor­rup­tion flour­ish­ing in dif­fer­ent parts of the coun­try. It could be in the form of bribery given for em­ploy­ment, an of­fi­cer tak­ing bribe for trans­fer­ring your file to the next depart­ment or even your­self of­fer­ing bribe to a traf­fic po­lice on break­ing a sig­nal etc. Cor­rup­tion has be­come a fact of life of ev­ery in­di­vid­ual in In­dia and has be­come a global phe­nom­e­non world­wide also. If we de­scribe the func­tion­ing of our coun­try then we men­tion it as a demo­cratic coun­try. But, In­dia is be­ing stripped of its democ­racy day by day be­cause of cor­rupt ac­tiv­i­ties. Ccor­rup­tion has come like an evil which is steal­ing food from the plates of the peo­ple, em­ploy­ment from the hands of cal­ibered can­di­dates, liveli­hood from the hands of hon­est and hard work­ing peo­ple, tak­ing away the hu­man rights and dig­nity and con­vinc­ing the peo­ple that it's all for their own good. Th­ese en­tire sit­u­a­tions show the pres­ence of struc­tural vi­o­lence within the coun­try. It refers to a form of vi­o­lence where some so­cial struc­ture or so­cial in­sti­tu­tion pur­port­edly harms peo­ple by pre­vent­ing them from meet­ing their ba­sic needs. The vi­o­lence can be due to bad po­lit­i­cal, so­cial, eco­nomic and moral con­di­tions. And all th­ese sit­u­a­tions to­gether make cor­rup­tion to pre­vail in a coun­try. Th­ese com­po­nents of struc­tural vi­o­lence can be classifieds in fol­low­ing terms:

Po­lit­i­cal cor­rup­tion

Po­lit­i­cal cor­rup­tion means the use of power by govern­ment of­fi­cials for il­licit and se­cret gain. An il­le­gal act by an elected of­fi­cial com­prises po­lit­i­cal cor­rup­tion only if their pro­ceed­ings are di­rectly re­lated to their au­tho­rized re­spon­si­bil­i­ties. Con­nec­tion be­tween bu­reau­crats, politi­cians and crim­i­nals is the main cause of cor­rup­tion in ev­ery coun­try. The bu­reau­crats al­ways fol­low the po­lit­i­cal or­ders and don't take any strict ac­tion against those crim­i­nals. As a re­sult, ter­ror­ism takes birth from th­ese crim­i­nals. Weak le­gal sys­tem of a coun­try raises cor­rup­tion. The laws that are nei­ther made timely nor ap­plied suit­ably and com­plex laws that need mul­ti­ple in­ter­pre­ta­tions and re­forms con­se­quently re­duce the ef­fec­tive­ness of th­ese laws. Ac­cord­ing to an in­dex shown by Trans­parency In­ter­na­tional, a global civic or­ga­ni­za­tion lead­ing the fight against cor­rup­tion, pre­sented that In­dia ranked 94 among 176 ter­ri­to­ries around the world. The in­dex of Trans­parency In­ter­na­tional has been made by con­sid­er­ing all the ar­eas in which cor­rup­tion takes place like ed­u­ca­tion, pol­i­tics, agri­cul­ture, man­u­fac­tur­ing, em­ploy­ment etc. In­dia does not

have any par­tic­u­lar com­mand­ments to avert cor­rup­tion. The scope of am­bi­gu­ity cre­ates an ad­van­ta­geous arena. Un­til peo­ple re­act strongly by dis­card­ing crooked peo­ple in elec­tions, one should not look for­ward to have a lot from the sys­tem.

There have been ' big- t i cket cor­rup­tions' in the In­dian econ­omy such as Bo­fors (1989), Har­shad Me­hta (1992), pal­molein oil im­ports in Ker­ala (1992), fod­der in Bi­har (1996), the Barak mis­sile (2001), cash for votes (2008), Satyam (2008), Madhu Koda and min­ing (2009), 2G Spec­trum (2010), Com­mon­wealth Games (2010), Adarsh Hous­ing So­ci­ety (2010), JBT Teacher's re­cruit­ment scam in Haryana (2013) and the lat­est scam in ed­u­ca­tion i.e. An­swer sheet Scam in M.D.U, Ro­htak . Th­ese Scams were of the big­gest in their do­main. Hence, cor­rup­tion has be­come a per­ma­nent sin for In­dia be­cause the big-ticket cor­rup­tions have in­creased con­tin­u­ously.

Moral Cor­rup­tion

Moral cor­rup­tion in­cludes the cor­rup­tion of prin­ci­ples, con­ven­tions and nor­mal hu­man de­sires. Poor func­tion­ing of the coun­tries has tight­ened the re­la­tion­ship of cor­rup­tion and peo­ple. Lack of eth­i­cal qual­i­ties and moral­ity among ad­min­is­tra­tors and politi­cians, il­lit­er­acy among mul­ti­far­i­ous laws and lack of ac­tions to erad­i­cate cor­rup­tion de­press the peo­ple for tak­ing steps against cor­rup­tion. Aris­to­tle (1943) made a link be­tween cor­rup­tion and un­eth­i­cal be­hav­ior. He ex­plained that a man acts in an un­eth­i­cal way when he be­comes a slave of his emo­tions, mind and think­ing i.e jeal­ousy, anger, hate, ego­ism; re­venge etc. and only in that sit­u­a­tion a per­son breaks law and cor­rup­tion pre­vails . It is termed as per­pe­tra­tion of im­moral be­hav­ior or cor­rup­tion. Pas­cal (1982) also has made a link be­tween cor­rup­tion and un­eth­i­cal be­hav­iour of hu­mans. Some re­searchers also ar­gue that govern­ment plays a vi­tal role in van­ish­ing of the moral val­ues of the peo­ple.

Or­ga­ni­za­tional Cor­rup­tion

The val­ues, at­ti­tude, be­liefs, prin­ci­ples and other ethics shared be­tween man­ager and em­ploy­ees to­gether make an or­ga­ni­za­tional cul­ture. The poli­cies and rules for­mu­lated by a com­pany af­fects the street level of­fi­cials a lot. Ac­cord­ing to some re­searchers, the street level of­fi­cials are the grass­roots of cor­rup­tion in or­ga­ni­za­tion while oth­ers ar­gue that top lev­els cause cor­rup­tion within the or­ga­ni­za­tion. For­mer be­lieves that the em­ploy­ees who are work­ing at base level and wish to have equal eco­nomic sta­tus as their up­per of­fi­cials have, they get in­dulged in cor­rupt as well as il­le­gal ac­tiv­i­ties. While the later be­lieves that the two lev­els be­low top level i.e. mid­dle and lower lev­els have to ac­com­plish or di­rect their work ac­cord­ing to the co­er­cion or di­rec­tion of their top of­fi­cials. So, some­times the top bod­ies try to con­ceal the norms and poli­cies of or­ga­ni­za­tion by im­pos­ing their pow­ers on mid­dle and lower subor­di­nates, in this way both subor­di­nates un­will­ingly get in­dulged in cor­rupt ac­tiv­i­ties. The in­for­mal role played by a man­ager in the form of lead­er­ship, mo­ti­va­tion, re­cruit­ment, se­lec­tion also gen­er­ates un­de­sired crim­i­nal ac­tiv­i­ties within the em­ploy­ees like not to take feed­back, not ac­cept­ing im­prove­ment of rules, not abid­ing by laws and acts for women and child labour, not pay­ing sat­is­fac­tory wages etc.

An­other rea­son of cor­rup­tion in or­ga­ni­za­tion is be­cause of glob­al­iza­tion. Any com­pany can open its branch or sub­sidiary in an­other coun­try for ex­pand­ing its busi­ness. But com­pa­nies per­form un­eth­i­cal and cor­rupt acts in th­ese sub­sidiaries only to gain ex­tra profit in the mar­ket. Com­pa­nies also su­press the im­por­tant in­for­ma­tion or pro­vide wrong in­for­ma­tion to its stake­hold­ers in or­der to make huge gains. Be­sides all th­ese rea­sons, the weak le­gal sys­tem of or­ga­ni­za­tion pos­si­bly di­rects it on cor­rupt lines. Hence, all th­ese bad acts to­gether make cor­rup­tion ram­pant in an or­ga­ni­za­tion.

Busi­nesses can play a cru­cial role in re­duc­tion of struc­tural vi­o­lence of the so­ci­ety by de­vel­op­ing a cul­ture and struc­ture that max­i­mize the pos­i­tive and min­i­mize the neg­a­tive im­pact in the so­ci­ety.

Eco­nomic cor­rup­tion

De­vel­oped fi­nan­cial mar­ket can fa­cil­i­tate growth by in­creas­ing pool of funds, re­duc­ing the risk and fa­cil­i­tat­ing the pool of funds from savers to in­vestors. Eco­nomic de­vel­op­ment of a coun­try re­quires sub­stan­tial amount of in­fra­struc­ture, goods and ser­vices along with for­eign flow of goods and cap­i­tal. Fi­nan­cial mar­ket plays a cru­cial role in cap­i­tal for­ma­tion in the econ­omy. There are so many par­tic­i­pants in the fi­nan­cial mar­ket like in­vestors, fi­nan­cial in­sti­tu­tions, mu­tual funds, Life In­sur­ance Cor­po­ra­tion, govern­ment, money mar­ket in­stru­ments etc. For the pur­pose of the de­vel­op­ment of this mar­ket re­forms and reg­u­la­tions are nec­es­sary. In the present sce­nario, for the pur­pose of cor­po­rate con­trol and fi­nan­cial elite in fi­nan­cial mar­ket, the econ­o­mists be­lieve that for­eign flow of goods and cap­i­tal is nec­es­sary. But cor­rup­tion is the force which is a hur­dle in the eco­nomic de­vel­op­ment of the coun­tries. Govern­ment is also a par­tic­i­pa­tory of the cor­po­ra­tions in the form of rules and reg­u­la­tions for­mu­lated for the or­ga­ni­za­tions. So, the econ­o­mists con­sid­ered po­lit­i­cal cor­rup­tion as one of the ma­jor hur­dle for the de­vel­op­ment.

Kholdy, Sohra­bian (2008) , con­cluded that cor­rup­tion is the ma­jor bar­rier in the flow of FDI in a coun­try. For­eign coun­tries have fear of the loss and mis­use of money in the coun­try like In­dia. In In­dia, po­lit­i­cal and fi­nan­cial cor­rup­tion re­sults into low cap­i­tal for­ma­tion than that of other coun­tries. The prob­lem of eco­nomic growth and fail­ure to achieve national wealth is the re­sult of ac­cu­mu­la­tion of power, lack of strong ap­pli­ca­bil­ity of law and un­nec­es­sary con­trols which lead to con­cen­tra­tion of power and even­tu­ally rope in wide­spread cor­rup­tion. The stronger de­sire for con­trol, own­er­ship and power paves a way of cor­rup­tion for an or­ga­ni­za­tion. The flow of goods, ser­vices and fi­nance doesn't flour­ish in the right way or for the pur­pose for which all th­ese sources should be used. The econ­omy can make bal­anced eco­nomic de­vel­op­ment and can be de­vel­oped only by us­ing the limited re­sources in a proper man­ner and in right di­rec­tion.

So­cial Cor­rup­tion

So­cial cor­rup­tion is the vi­o­lence in the so­ci­ety or when the in­di­vid­u­als de­prive each other from their necessities then the so­ci­ety faces so­cial cor­rup­tion. A na­tion ba­si­cally be­comes cor­rupt only by the in­di­vid­u­als who live in that na­tion. No, law can stop univer­sal cor­rup­tion be­cause the cor­rup­tion arises some­where from the mind, think­ing, re­la­tion­ship of in­di­vid­u­als within so­ci­ety, re­li­gion and rit­u­als which a per­son has. Laws and norms are made for the crime made by the in­di­vid­u­als but no where any law has been framed till now for the in­di­vid­ual's cor­rupt mind which di­rects a per­son to do cor­rupt act. When there is no hon­esty, no one can ex­pect any good re­sults from there. Ac­cord­ing to some re­searchers, to­day it has be­come more dif­fi­cult for a na­tion to re­move cor­rup­tion from the so­ci­ety be­cause so­ci­ety has the re­la­tion with all other par­ties like govern­ment, fi­nan­cial mar­ket, or­ga­ni­za­tion etc.

The kind of ed­u­ca­tion that is be­ing im­parted to the cit­i­zens for bet­ter fu­ture, is a waste. It is the moral frame­work which is re­spon­si­ble for the ex­ten­sion of cor­rup­tion. When a mod­est hu­man be­ing sees the of­fi­cers, the boards, the law­givers and law keep­ers do­ing fraud­u­lent ac­tiv­i­ties, then he/she will have very limited chances of not do­ing cor­rupt ac­tiv­i­ties. Po­lice is one of the se­ri­ous ex­am­ples of ram­pant cor­rup­tion which we look in our daily life. If the pro­tec­tors of law mis­use this law by mak­ing ex­tra money un­der the ta­ble or a gang­ster in po­lice uni­form, then no so­lu­tion is left for the com­mon man.


Haguette La­belle , chair per­son of Trans­parency In­ter­na­tional ex­pressed about cor­rup­tion that “we must en­sure that there are real con­se­quences to cor­rup­tion. “No to im­punity” can­not just be a slo­gan. It must be car­ried out with all our com­bined strength and in­spire cit­i­zens to speak up and to no longer tol­er­ate cor­rup­tion.” Th­ese lines sug­gest that the so­ci­ety will have to for­mu­late a strong strat­egy to fight cor­rup­tion. A panacea for the epi­demic like cor­rup­tion is to main­tain norms and ideals of hon­esty that lies within us. Of­fi­cial pro­ce­dure should fol­low an am­i­ca­ble at­ti­tude to­wards cit­i­zens and should be ac­count­able and trans­par­ent. Lok­pals and Vig­i­lance Com­mis­sions should be more au­thor­i­ta­tive and of sov­er­eign na­ture so as to pro­vide quick and fair deal­ing. Peo­ple should be aware about their right to ques­tion the elected rep­re­sen­ta­tives. More and more pub­lic ar­eas should be brought un­der Right to In­for­ma­tion, which can au­tho­rize the cit­i­zens to seek more and more in­for­ma­tion. In­dian laws on cor­rup­tion have been chang­ing over time such as RTI act which peo­ple have to be aware of.


Aris­to­tle (1943). “Pol­i­tics”. The mod­ern li­brary. Newyork. Punch, M. (2000). “Po­lice cor­rup­tion and its preven­tion”. Euro­pean Jour­nal of Crim­i­nal Pol­icy and re­search. Vol. 8. Pp.301-324. Glaeser, L.G., La­porta. R ., Lopez-de-Si­lanes and Sh­leifer, A. (2004). Do in­sti­tu­tions caused growth?”. Jour­nal of Eco­nomic growth. Vol. 9.Pp.271-303. Fin­nie, Bruce.W., Gib­son, Linda.K and David E. Mcnabb (2006). “Eco­nomic de­vel­op­ment: Cor­rup­tion, Com­plex­ity, Wealth and a triad of strains”. Hu­ma­nomics. Vol.22. is­sue.4. Pp.185-204. Evrensel, Ayse.Y and Ali M.Ku­tan (2007). “Are multi­na­tional afarid of so­cial vi­o­lence in emerg­ing mar­kets?: Ev­i­dence from In­done­sian prov­inces”. Jour­nal of Eco­nomic stud­ies. Vol. 34. Is­sue.1. pp. 59-73. Dubee, Fred (2007). “Struc­tural Vi­o­lence and Pro­duc­tivty: The role of Busi­ness and United Na­tions global Com­pact”. In­ter­na­tional Jour­nal of Pro­duc­tiv­ity and Per­for­mance Man­age­ment. Vol.56. Is­sue.3. Pp. 252-258. Kholdy, Shedy and Ahmed Shor­bian (2008). “For­eign Di­rect In­vest­ment, Fi­nan­cial amar­ket and Po­lit­i­cal Cor­rup­tion”. Jour­nal of Eco­nomic Stud­ies. Vol.35. is­sue.6. Pp.486500. Za­man, Asad and Faiz-ur-Rahim (2009). “Cor­rup­tion: mea­sur­ing the un­mea­sur­able”. Hu­ma­nomics. Vol.25. is­sue.2. Pp. 117-126. Otu­sanya, Olatunde julius ( 2009). “Cor­rup­tion as an ob­sta­cle to de­vel­op­ment in de­vel­op­ing coun­tries : a re­view of lit­er­atire”. Jour­nal of money Laun­der­ing. Vol.14. is­sue.4. Pp. 387-422. Dion, Michen (2010) “What is cor­rup­tion cor­rupt­ing? A philosph­i­cal view­point”. Jour­nal of money laun­der­ing con­trol. Vol.13. is­sue.1.Pp. 45-54. Soot, Mari-liis (2012). “The role of man­age­ment in tack­ling problen”. Baltic Jour­nal of Man­age­ment.­sue.3. Pp.287-301. Tod­hunter, Colin (2012). “In­dia :Struc­tural vi­o­lence, Mass Poverty and So­cial in­equal­ity”. Global Re­search.

6. Lot­tery Busi­ness 7. Gam­bling and Bet­ting 8. Busi­ness of Chit Fund 9. Agri­cul­ture (ex­clud­ing Flori­cul­ture, Hor­ti­cul­ture, De­vel­op­ment of seeds, An­i­mal Hus­bandry, Pis­ci­cul­ture and cul­ti­va­tion of veg­eta­bles, mush­rooms, etc. un­der con­trolled con­di­tions and ser­vices re­lated to agro and al­lied sec­tors) and Plan­ta­tion ac­tiv­i­ties (other than Tea Plan­ta­tions) . 10. Hous­ing and Real Es­tate busi­ness. 11. Trad­ing in Trans­fer­able De­vel­op­ment Rights (TDRs). 12. Man­u­fac­ture of cigars, che­roots, cigar­il­los and cig­a­rettes, of to­bacco or of to­bacco sub­sti­tutes.


Coun­try­wise FDI in­flows from APRIL 2000 to Fe­bru­ary 2012.


To study the trend and pat­tern of FDI in­flows to In­dia. To un­der­stand the need for FDI in In­dia. To ex­hibit the sec­tor-wise & year-wise anal­y­sis of FDI in In­dia.


This re­search is a de­scrip­tive study in na­ture. The study is based on sec­ondary data which was col­lected from var­i­ous jour­nals, mag­a­zines, and web­sites par­tic­u­larly from the Depart­ment of In­dus­trial Pol­icy & Pro­mo­tion, Min­istry of Com­merce and In­dus­try etc.

Post-Lib­er­al­iza­tion Pe­riod: A ma­jor shift oc­curred when In­dia em­barked upon eco­nomic lib­er­al­iza­tion and re­forms pro­gram in 1991 aim­ing to raise its growth po­ten­tial and in­te­grat­ing with the world econ­omy. In­dus­trial pol­icy re­forms grad­u­ally re­moved re­stric­tions on in­vest­ment projects and busi­ness ex­pan­sion on the one hand and al­lowed in­creased ac­cess to for­eign tech­nol­ogy and fund­ing on the other. A se­ries of mea­sures that were di­rected to­wards lib­er­al­iz­ing for­eign in­vest­ment in­cluded: (i) in­tro­duc­tion of dual route of ap­proval of FDI – RBI's au­to­matic route and Govern­ment's ap­proval (SIA/FIPB) route, (ii) au­to­matic per­mis­sion for tech­nol­ogy agree­ments in high pri­or­ity in­dus­tries and re­moval of re­stric­tion of FDI in low tech­nol­ogy ar­eas as well as lib­er­al­iza­tion of tech­nol­ogy im­ports, ( iii) per­mis­sion to Non-res­i­dent In­di­ans (NRIs) and Over­seas Cor­po­rate Bod­ies (OCBs) to in­vest up to 100 per cent in high pri­or­i­ties sec­tors, (iv) hike in the for­eign eq­uity par­tic­i­pa­tion lim­its to 51 per cent for ex­ist­ing com­pa­nies and lib­er­al­iza­tion of the use of for­eign 'brand names' and (v) sign­ing the Con­ven­tion of Mul­ti­lat­eral In­vest­ment Guar­an­tee Agency (MIGA) for pro­tec­tion of for­eign in­vest­ments. Th­ese ef­forts were boosted by the en­act­ment of For­eign Ex­change Man­age­ment Act (FEMA), 1999 [that re­placed the For­eign Ex­change Reg­u­la­tion Act (FERA), 1973] which was less strin­gent. This along with the se­quen­tial fi­nan­cial sec­tor re­forms paved way for greater cap­i­tal ac­count lib­er­al­iza­tion in In­dia.

In­vest­ment pro­pos­als fall­ing un­der the au­to­matic route and mat­ters re­lated to FEMAare dealt with by the RBI, while the Govern­ment han­dles in­vest­ment through ap­proval route and is­sues that re­late to FDI pol­icy per se through its three in­sti­tu­tions, viz., the For­eign In­vest­ment Pro­mo­tion Board (FIPB), the Sec­re­tariat for In­dus­trial As­sis­tance (SIA) and the For­eign In­vest­ment Im­ple­men­ta­tion Au­thor­ity (FIIA).

FDI un­der the au­to­matic route does not re­quire any prior ap­proval ei­ther by the Govern­ment or the Re­serve Bank. The in­vestors are only re­quired to no­tify the con­cerned re­gional of­fice of the RBI within 30 days of re­ceipt of in­ward re­mit­tances and file the re­quired doc­u­ments with that of­fice within 30 days of is­suance of shares to for­eign in­vestors. Un­der the ap­proval route, the pro­pos­als are con­sid­ered in a time-bound and trans­par­ent man­ner by the FIPB. Ap­provals of com­pos­ite pro­pos­als in­volv­ing for­eign in­vest­ment/ for­eign tech­ni­cal col­lab­o­ra­tion are also granted on the rec­om­men­da­tions of the FIPB. Cur­rent FDI pol­icy in terms of sec­tor spe­cific lim­its has been sum­ma­rized in­Table be­low:

Rea­sons for FDI slow­down – An Econo­met­ric Ev­i­dence

The re­view of the­o­ret­i­cal and se­lect em­pir­i­cal lit­er­a­ture re­veals that FDI flows are driven by both pull and push fac­tors. While pull fac­tors that re­flect the macroe­co­nomic pa­ram­e­ters could be in­flu­enced by the poli­cies fol­lowed by the host coun­try, push fac­tors es­sen­tially rep­re­sent global eco­nomic sit­u­a­tion and re­main be­yond the con­trol of economies re­ceiv­ing th­ese flows.



Ta­ble 1 shows the amount of FDI in­flows from April 2011 to Fe­bru­ary, 2012. It shows the amount in Rs crore and in US $ mn. The high­est FDI in­flows in the coun­try is in the month of June 2011 i.e. 25371 in Rs crores and 5656 in US$ mn. Other months show the fluc­tu­at­ing trend.


Ta­ble 2 shows the fa­vorite and lead­ing sec­tors for FDI in In­dia. Ac­cord­ing to FDI re­port Ser­vice sec­tor is the fa­vorite sec­tor with high­est FDI in­flow of 20%. Af­ter ser­vice sec­tor Telecom­mu­ni­ca­tion and Com­puter Hard­ware & Soft­ware is the next fa­vorite sec­tor with 8% and 7% of to­tal in­flows re­spec­tively. There is a good prospect for in­vestors in other sec­tors also like hous­ing sec­tor and power sec­tor. 2) STATE­MENT ON COUN­TRY-WISE FDI IN­FLOWS FROM APRIL, 2000 TO FE­BRU­ARY, 2012 In­ter­pre­ta­tion

Ta­ble 3 de­picts the coun­try hav­ing the high­est FDI in In­dia. The re­port shows that the MAU­RI­TIUS has the high­est for­eign in­vest­ment in In­dia with 39.25%. Af­ter Mau­ri­tius, Sin­ga­pore and Ja­pan in­vest the high­est FDI in In­dia with 10.46% and 7.53% re­spec­tively. U.S.A also gets 4th po­si­tion in FDI in In­dia.


Ta­ble 4 shows the to­tal amount of FDI in­flows in In­dia dur­ing the last 10 years i.e 2000 to 2012. The FDI in­flow in 2000-2001 was Rs. 10,733 crore whic rose in 2001-02 to Rs. 18,654 crore. It shows good re­sults in the FDI in­flows in in­dia. There were lit­tle bit ups and downs in FDI in­flows upto 2005-06, but af­ter that there was agreat hike in the year 2007-08 i.e Rs. 98,642crore ru­pees as com­pared to ear­lier years. In 2008-2009 there was a huge in­vest­ment in FDI to the tune of Rs. 142,829 crore and so on. So we can say that the for­eign in­vest­ment has been on the rise in In­dia.


FDI is an im­por­tant stim­u­lus for the eco­nomic growth of In­dia. FDI has shown a tremen­dous growth in sec­ond decade (2000 -2011) that is three times then the first decade of FDI in ser­vices sec­tor. Ser­vice sec­tor is first and bank­ing and in­sur­ance sec­tors are sec­ond seg­ments which have picked the growth in sec­ond decade of re­forms. FDI cre­ates high perk jobs for skilled em­ploy­ees in the In­dian ser­vice sec­tor. Mau­ri­tius and Sin­ga­pore are the 2 top coun­tries which have max­i­mum FDI in In­dia. FDI plays an im­por­tant role in the de­vel­op­ment of in­fra­struc­ture be­cause many coun­tries in­vest in the in­fra­struc­ture sec­tor and ser­vice and bank­ing fi­nance sec­tors. Atomic En­ergy and Rail­way Trans­port are im­por­tant life lines of a coun­try. There­fore In­dia also re­stricted FDI in th­ese sec­tors. Af­ter above anal­y­sis , we can say that FDI has good fu­ture in the growth of Re­tail­ing and Real es­tate sec­tors in In­dia.


It can be ob­served from the above anal­y­sis that at the sec­toral level of the In­dian econ­omy, FDI has helped to raise the out­put, pro­duc­tiv­ity and em­ploy­ment in some sec­tors es­pe­cially in ser­vice sec­tor. In­dian ser­vice sec­tor is gen­er­at­ing the proper em­ploy­ment op­tions for skilled work­ers with high perks. On the other side bank­ing and in­sur­ance sec­tors help in pro­vid­ing the strength to the In­dian econ­omy and de­velop the for­eign ex­change sys­tem in coun­try. So, we can con­clude that FDI al­ways helps to cre­ate em­ploy­ment in the coun­try and also sup­ports the small scale in­dus­tries. It helps the coun­try to put

a world wide im­pres­sion that In­dia is pro­gress­ing through lib­er­al­iza­tion and glob­al­iza­tion.


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Source: As per DIPP's FDI data base


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