Should the Indian Government Allow Foreign Investment?

Topics: Commerce, Better, Business Pages: 2 (445 words) Published: February 25, 2011
Evaluate whether the Indian Government should encourage further foreign investment into the country.

There are reasons both for and against the investment from foreigners into India. This investment can take the form of MNC’s providing jobs for the locals, as well as improving the country’s infrastructure.

On the one hand, India should be welcoming this investment as it is a great way for the country to gain the MNC’s help. They can provide jobs to the locals, by setting up their businesses within India. This can then create the multiplier effect, as it would be cheaper for the MNC to source components or resources locally instead of importing them in. This means that they will be helping much more of the community with more than just jobs.

Another reason for this investment would be the infrastructure benefits they could bring. The business will obviously want good transport links to import/export goods to and from their workplace. This means the MNC may contribute towards this upkeep and improvement of the surrounding area to ensure their products are delivered quickly and efficiently.

However, on the other hand, local businesses could be put into danger. With MNC’s entering the country, they may put the local businesses out of business. Because of huge profits that the MNC will have from other places around the globe, they can afford to undercut the competition or even takeover these businesses to increase market share instantaneously.

As well as this, the MNC may not cause the multiplier effect to happen, in fact possibly causing the opposite. As they will already have suppliers from around the world, they may be able to get these products imported with trade credit, making it cheaper than sourcing the goods locally. This will have a negative effect on the local businesses.

In conclusion, I feel that the Indian Government should be welcoming foreign investment to an extent. I feel this foreign activity should be controlled,...
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