The Economic and Social Impacts to India and Its Citizens from Inward Foreign Direct Investment

Developing countries greatly need to boost economic investment in order to spur growth, boost jobs, transfer advanced technologies, reduce poverty and increase their capacity to expand social welfare programmes. Towards this end, most have constructed and coordinated vigorous policies to attract new foreign direct investment (FDI) and India is no exception to this (OECD, 2002; Stiglitz, 2006; Rao and Dhar, 2011b). Transnational corporations (TNCs), the source of most FDI, are powerful actors in the global economy and they, in turn, try to get the best possible deals from governments who are desperate to host them. In such a charged economic and political environment, there is no guarantee that FDI will implant these desired assets (Nunnenkamp, 2002; OECD, 2002; 2008; Lipsey, 2003). Indeed, there is evidence to suggest that TNCs bring a great many risks, as well as benefits, including labour exploitation, corrupt practices, including bribery, and the ability to unduly influence policy outcomes and monopolise domestic markets (Madeley, 1999; Richter, 2001; Farnsworth, 2004). Thus, TNCs carry great risks, for the citizens, economies and local communities of host countries enticing FDI in the hopes of securing seriously needed development assistance. This thesis analyses the potential benefits and disadvantages of FDI to India and its citizens as reported by elite policy stakeholders. The research is based on qualitative interviews in New Delhi, India with 40 participants from NGOs, IGOs, and policy and research organisations that target economic and social development issues. In addition, it utilises documentary and policy analysis methods in order to investigate India’s investment and development strategy through the Indian investment bureaux. Through this analysis, the thesis reveals that FDI to India brings both benefits and disadvantages to its citizens and economy. India’s current growth model is catering to the middle class consumer and employment needs and in this regard, FDI has increased opportunities and brought advantages. However, FDI is not bringing much benefit for those in the lower social classes. What’s worse, it is attributed to socioeconomic ills such as widening inequalities, increased social tensions, land displacement and the transport of low levels of global value chains which are rife with poor working conditions and exploitation.