Impact of FDI on Employment in India

Running head: INTERNATIONAL MANAGEMENT
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1INTERNATIONAL MANAGEMENT
Impact of FDI on employment in India
India has faced and still facing the variable impact of the foreign direct investments in
terms of their employment. This is due to the fact that India is much diverse country with the
presence of different sectors with different requirements and business trends. Thus, in some of
the sectors, foreign direct investments are having positive impacts on employment while there
are negative impacts on others1. However, according to various reports, foreign direct
investments is having majorly positive impact on the employment scenario of India and is one of
the major contributor in making the country a potential economic superpower in the near future.
The following section will discuss about both the positive as well as negative impact of foreign
direct investments on the employment scenario of India2.
Impact on the primary sector
India is still primarily a agricultural economy with major portion of the gross domestic
product is coming from this sector. Thus, the primary sector of India is the agricultural sector. It
is reported that foreign direct investments is having moderate impact on the agricultural sector
mainly due to the restrictions associated with it. According to foreign direct investments policy
of the Indian government, only some of the particular areas of the agricultural sector are allowed
for 100 percent foreign direct investments, while majority of the agricultural sector of India is
restricted from the inflow of foreign direct investments3. This is being done in order to safeguard
1 Mehra, Netrja. "Impact of foreign direct investment on employment and gross domestic product in India."
International Journal of Economics and Research 4.4 (2013): 29-38.
2 Chandrachud, S., and N. Gajalakshmi. "The economic impact of FDI in India." International Journal of
Humanities and Social Science Invention 2.2 (2013): 47-52.
3 Dash, Ranjan Kumar, and Purna Chandra Parida. "FDI, services trade and economic growth in India: empirical
evidence on causal links." Empirical economics 45.1 (2013): 217-238.

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the interest of the local stakeholders. In this case, it should be noted that the Indian agricultural
sector is majorly unorganized in nature and thus inflow of the foreign direct investments will
make difficult for this sector to withstand the challenge. It is reported that areas such as
horticulture, floriculture, apiculture and cultivation of some cash crops such as tea and coffee
plantation are being allowed for 100 percent foreign direct investments4.
It is seen that due to the inflow of investments in these sectors, average capital got
increased, which further increased the employment opportunities. This is due to the fact that
agricultural sectors got the foreign direct investments increased in terms of the business, which
required more employment. For example, horticulture is becoming one of the most popular and
sought after sectors in the agricultural field in the recent time5. However, in the late nineties and
prior to the economic liberalization in 1991, this sector is not evident in the Indian agricultural
scenario6. Thus, it can be considered as a positive impact of the foreign direct investments on the
employment in India. However, there is number of reports also being published, which stated
about the negative consequences of the foreign direct investments in these sectors. For example,
in the current time, coffee and tea plantation is India is majorly in the hand of large business
houses and presence of individual growers is negligible. This is mainly due to the fact that
unorganized tea and coffee growers were not being able to face the challenge of huge
investments done by the foreign players7. From this perspective, inflow of the foreign direct
investments is having negative impact on the Indian agricultural sector. However, due to the fact
4 Pillai, K. R., and M. S. Rao. "Determinants of inward FDI to India: A factor analysis of panel data." Journal of
contemporary management research 7.1 (2013): 1-16.
5 Bagli, Supravat, and Manikal Adhikary. "FDI inflow and economic growth in India an empirical analysis."
Economic Affairs 59.1 (2014): 23.
6 Mrinalini, N., Pradosh Nath, and G. D. Sandhya. "Foreign direct investment in R&D in India." Current Science
(2013): 767-773.
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