The story we are usually told about foreign direct investment is deeply misleading: ----------------------------------------------------------------------------------------------- ‘It is crucial to note the parasitic character of most of the capital inflows into India. The bulk of it is not used for real investment in the Indian economy. According to the GoI’s Economic Survey, the gap between domestic saving and domestic investment was close to zero between 2002 and 2008, suggesting that India’s investment was financed almost entirely from domestic sources. This means that the net capital inflows from abroad during these five years, amounting to over $120 billion, actually drew massive returns from India without contributing in any way to the creation of new productive capacity. What were these surplus foreign funds used for? They added to the dollar reserves of the RBI, helping finance surplus imports. India was, in effect, seduced into living beyond its means.’ (from a book Churning the Earth: The Making of Global India,....published by penguine iindia....)
Posted on: Sun, 25 Aug 2013 19:39:27 +0000
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