Tag: FDI

India's Foreign Direct Investment(FDI) to be accumulated to whopping $100 billion by the end of this fiscal year.

India is on track to attract $100 billion in foreign direct investment (FDI) in the current fiscal on account of economic reforms and ease of doing business, the government said on September 24, 2022.

In 2021-22, the country received the “highest ever” foreign inflows of $83.6 billion.

“This FDI has come from 101 countries, and invested across 31 union territories and states and 57 sectors in the country. On the back of economic reforms and Ease of Doing Business in recent years, India is on track to attract $100 billion FDI in the current FY (financial year),” the commerce and industry ministry said in a statement.

The statement also mentions that the government has installed a liberal and transparent policy to attract foreign investment. Currently, most sectors of the Indian economy are open to FDI under an automatic route.

The Foreign Direct Investment (FDI) in India can be made under two routes- automatic and government routes. Under the automatic route, the investor requires no or very less permissions from the Reserve Bank of India (RBI) or from the Government of India to invest.

Under the government rules, permissions from the appropriate authorities of the government or the RBI are required to invest in the country.

The reform measures include liberalization of guidelines and regulations, in order to reduce unnecessary compliance burdens, bring down costs and enhance the ease of doing business in India, the statement added.

Make in India initiative is an open invitation to potential investors and partners across the globe to participate in the growth story of ‘New India’. Make In India has substantial accomplishments across 27 sectors. These include strategic sectors of manufacturing and services as well. Production Linked Incentive (PLI) scheme across 14 key manufacturing sectors, was launched in 2020-21 as a big boost to Make in India initiative.

INVESTMENT MODELS

Before starting with investment models we must understand what investment is. Investing is the exchange of money for profitable assets. The same profit is used to invest in other assets. Investment is important for a country’s economic well-being, as it contributes to growth and development. When a government invests in a business, agriculture, manufacturing, or support industry, it can create employment opportunities for its people. However, a strong investment scenario is when the government and the private sector work together to create investment opportunities. Also, we make an investment and choose a proxy for a investment model, we should keep in mind that the following factors are involved: Savings rate. National tax rate. (Net profit after tax). inflation. Bank interest rates. Potential rate of return on investment. Availability of other factors of production (cheap land, labor, etc.) and the infrastructure that underpins them-transportation, energy, telecommunications. Market size and stability.

TYPES OF INVESTMENT MODELS

The following are the main investment models Public investment models: In public investment models, the government makes investments in specific goods and services through the central or state government or with support from the public sector using the revenue generated from this activity. . Private Investment Model: As is the case with India, there are times when public sector revenues are not sufficient to cover some of the revenue shortfalls that may arise. Therefore, the government invites private members to invest in some of its companies. This investment can be domestic or foreign. Foreign direct investment (FDI) can improve existing infrastructure and create jobs in the process. This model is one of the most sought-after in terms of outside investment. Public-private partnership model: A public-private partnership (PPP, 3P, or P3) is a partnership agreement between two or more public and private sectors, usually on a long-term basis. The following sectors in India already have projects based on the PPP model: Health, Power industry, Railways, Urban housing.

There are also other investment models. They are as follows: Country investment model: can be public company or PPP Foreign investment model: can be mostly foreign or a mixture of foreign – domestic Sector-specific investment models: where investments are made in special economic zones or other related sectors Cluster investment models: Investment in manufacturing industries is an example.

INVESTMENT MODELS USED IN INDIA

The following investment models are used:

Harrod-Domar model: This model is biased towards an industry model in which the driver of economic growth depends on policies that increase saving and technological progress.

The Solow Swan Model: This is an extension of the Harrod-Domar model, with a particular focus on productivity growth.

Feldman – Mahalanobis Model: This model focuses on improving the domestic consumer goods sector, where there is sufficient capital sector commodity capacity. It then evolved into the four-zone pattern also known as the Nehru-Mahalanobis model.

Rao ManMohan Model: Named after Narasimha Rao and Dr. Manmohan Singh, this model applies the policy of economic liberalization and FDI inflows in 1999. Lewis model of economic development through supply unlimited labor.

Sources: https://www.insightsonindia.com/indian-economy-3/investment-models/

Baltic Countries and their economic transformation

Baltics, also known as the Baltic States is comprised of three countries including Latvia, Lithuania, and Estonia. The three countries are situated on the eastern shores of the Baltic Sea. In 1991 the regional governments of Lithuania, Latvia, and Estonia declared independence from the Union of Soviet Socialists Republics (USSR). Three countries have a collective population of just over 6 million. The three have been one of the better examples which have been progressing well after the breakup of the USSR. Many other former Soviet republics have been suffering the disarray of corruption and political instability.

In 2002 Baltic countries applied for membership in the European Union (EU) and by May 2004 all the three countries joined the EU. They also gained membership in NATO by March 2004.

Downtown Tallinn

Baltic independence in 1991

It’s truly astounding how the three countries have developed since 1991. None of them were independent since 1940. The three countries had large Russian minorities and many Soviet soldiers were still stationed there. There were no major national institutions and banking infrastructure with a crumbling economy. There was a growing homegrown national moment against the ruling government since the 1980s. The homegrown fronts won the republican parliamentary election against the ruling party in early 1990 and were allowed to govern but with limited power. The Russian president at that time, Boris Yeltsin had not contested their newly declared independence in 1991. The Baltic also witnessed no violence when the three governments had declared their independence.

The three nations also had almost no natural resources, unlike USSR which was resource-rich. They were still in a very vulnerable situation with a small population and no military of their own. Even though the countries were linguistically distinct with different languages, but people in all three countries had a united drive to strive for a better future. The three had implemented reforms with a shared vision. The governments of the three shared many policies, ideas, and experiences. The Baltic States also valued their new independence with a lot of enthusiasm and didn’t take it for granted. The other ex- USSR countries often had to ask for assistance from Russian Federation and also formed new alliances with the Russian government. Baltic countries on the other hand tried to stay away from joining the post-Soviet Commonwealth of Independent States. In the subsequent years, all the three countries adopted radical economic policies and Estonia was the first mover and Latvia and Lithuania would follow suit. In 1994 Estonia introduced a flat income tax at just 24 percent and the other two also implemented the policies. Currently, Lithuania has a tax rate of just 15 percent which is one of the lowest. With early and fast deregulation and privatization, the Baltic countries were able to capture a large amount of foreign direct investment. Estonia also radically transformed its public sector with various digitalization implementations and less reliance on paperwork. Latvian and Lithuania’s transformation in this area was not as drastic but after some time both of them followed Estonia’s footsteps.  Transparency International ranks Estonia No. 17, Lithuania 37, and Latvia 42 out of 175 countries on its Corruption Perception Index for 2020. This is a commendable ranking considering they all the three are a relatively new entrant to the EU and many other EU countries have lower ranks than the three.

Success attributions

The success can also be attributed to the generous support that the three countries received from the international community and funds granted by the EU, World Bank, and the IMF. In 2008 Baltic suffered from the global economic crisis. The three soon adopted the Euro as their currency to avoid any future liquidity freeze issues that they experienced at that time. The economies al the Baltic rebounded quickly and due to good monetary measures, the three have a very low public debt. Baltic governments have also made swift progress in the Education sector and the three have attained commendable rankings in the Program for International Student Assessment (PISA) of the Organization for Economic Cooperation and Development (OECD). Estonia has done a very commendable task in this area with top 10 rankings in many assessments.  But the Baltics also face many challenges with population loss due to low birth rate and emigration. Proximity and hostility with Russia still is a challenge that the tiny nations have to endure.