Analyzing International Trade: FDI, Growth, and Exchange Rates

This report examines the dynamics of international trade, focusing on the relationship between Foreign Direct Investment (FDI) and economic growth, as well as the influence of exchange rates and competition. It highlights that FDI involves capital transfer between countries to establish long-term relationships, with a minimum of 10% voting power in a company considered a lasting interest. India's infrastructure industry, for instance, witnessed significant FDI inflows, encouraged by government initiatives. The report also emphasizes the importance of adhering to SEBI regulations. Furthermore, it analyzes how cumulative inbound FDI into India reached a record high, attributing this surge to government policies promoting India as an investment destination. Singapore and the United States are identified as major contributors to FDI equity. The report references multiple studies and reports, including those from UNCTAD, to provide a comprehensive overview of the factors driving international trade and investment trends.

Trade and International

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Linkage between growth and FDI............................................................................................................3
Exchange rate and competition...............................................................................................................4
REFERENCES................................................................................................................................................6

INTRODUCTION
International trade is a sort of engagement between nations that involves the sellers and
buyers of commodities on a mutually agreed-upon basis. Trade and commerce coordination is
not a new concept; it has existed because since middle Ages. Increased GDP (Gross Domestic
Product), or the entire value of goods and services produced in a country for a year, is one of the
goals of global trade. International commerce has social, cultural, and financial consequences,
assisting in the advancement of industrial, transit, globalization and the establishment of
transnational companies (Kale, 2021). Trade can be defined as a method of exchanging goods
and services that is based on mutual contract between the two engaged. Nations around the globe
have been unable to generate all of the items required for their own requirements, necessitating
assistance from other nations. This procedure would then be a cross-national trading activity, or
output interaction. International trade refers to trading between states. For this report select
develop country is India.
MAIN BODY
Linkage between growth and FDI
Foreign Direct Investment (FDI) is the transfer of capital from one country to the other
with goal of developing a 'long-term relationship.' As per the OECD (Organisation for Economic
Founder and Growth), enduring interest is established when a company obtains at least 10%
voting power in another company. For example, an Indian company like Ola establishing a new
headquarters in Sydney, Australia will be seen as introducing FDI into the country.
In India and the rest, foreign direct investment shows private equity of manufacturing plants. For
a corporation to be categorized as direct investment, foreign ownership must account for at least
10% of the company's worth. Industrial, tourism, agribusiness, and other industries might all
benefit from the expenditure. It could have started as a strategic alliance (starting from scratch), a

purchase (purchasing an existing business), or a partnership (partnership). The amount of fresh
investment generated in the nation as during current year is recorded on an each year. It accounts
for around 2% to 3% of the national economy total size as measured by gross domestic product.
It is considered a great achievement if a country attracts FDI that reaches 5% to 6% of GDP on a
yearly basis (Varma, 2021).
The relationship between FDI and a nation's economic growth has caught the imagination
of academics, economists, and academics working in the field of education research in both
developed and developing countries. Unfortunately, there is few research on sector-specific
analyses of the Foreign direct investment correlation. Following a thorough assessment of
economic literature, found a few that explore the role of sectors in the foreign investment
connection. This section provides a summary of studies that have been undertaken to determine
the impact of FDI on the presence of new industries or, in some circumstances, a single industry
of an economic. In FY 2021, India's infrastructure industry received around 7.9 billion dollars in
foreign direct investment equities. In comparison to past years, it really was a substantial growth.
The administration's "National Infrastructure Pipeline" programme encourages participation of
private participation in the construction industry, which could explain the increase in Foreign
investment.
 (SEBI's relevant rules, including the Issuance of Capital and Reporting Requirements
(ICDR) Regs Purchase of Stock and Power grabs (SAST) Legislation, as well as other
legislative requirements, must be followed.
 Only the following companies are eligible for a Schedule Driver's Permit:
Exchange rate and competition
As per official estimates, cumulative inbound FDI into India reached a new high of
US$81.72 billion in the fiscal year (FY) 2020-21. At US$74.39 billion, total FDI, which includes
stock, equipment, and re-invested income, increased by 10% over the latest quarter? This surge
in FDI inflow, per the national govt, is due to several government-led participative policies and
reforms aimed at making India a favored international investment target. During FY 2015-16 and
FY 2019-20, total FDI entry into India increased by 6% CAGR (Chitambara, 2021)

Nevertheless, according to the UN Conference on Trades and Developement (UNCTAD)
Global Economic Report 2021 (see here), India saw a 27 percent rise in direct investment in
2020 compared to 2019, giving it the fifth largest FDI beneficiary. Based on the current Indian
government, FDI equity inflows paid Approximately59.64 billion to India's overall receipts of
US$81.72 billion in FY21. Inward FDI equity increased by 19 percent from the prior fiscal year,
when it was US$49.98 billion. The majority of this influx (US$51.47 billion) came in over the
first nine months of FY21, from April to December 2020, with the largest increase in August
2020 (Udemba and Yalçıntaş, 2021).
According to a UNCTAD analysis released in June, India would get US$64 billion in
2020, up from US$51 billion in 2019, owing to purchases in the information communication
technology (ICT) sector. This is understandable, given the pandemic's unparalleled rise of digital
facilities and services, which resulted in global brownfield investment projects. In India, this
includes Amazon investing US$2.8 billion in the country's ICT sector. Singapore was India's
leading private buyer in FY21, accounting for US$15.71 billion in FDI equity from April to
December 2020. Singapore was responsible for 29 percent of India's FDI inflow.
The United States was the second largest contributor in India, contributing for 23% of
total FDI. Especially opposed to the earlier fiscal year, the quantity of inbound FDI capital from
the United States increased by 227 percent (Chatterjee and Kundu, 2021).

REFERENCES
Books and Journal
Kale, S., 2021. The influence of non-R&D channels on innovation in a developing economy: an
empirical analysis in the context of India. International Review of Applied Economics,
pp.1-17.
Varma, V., 2021. FOREIGN DIRECT INVESTMENT. Journal of Economics and Economic
Education Research. 22(3). pp.1-2.
Chitambara, P., 2021. FDI and domestic investment in Africa: Evidence on the role of local
conditions. The Journal of Developing Areas/. 55(1).
Udemba, E. N. and Yalçıntaş, S., 2021. Interacting force of foreign direct invest (FDI), natural
resource and economic growth in determining environmental performance: A nonlinear
autoregressive distributed lag (NARDL) approach. Resources Policy. 73. p.102168.
Chatterjee, N. and Kundu, D., 2021. Role of FDI in Developing the Base of Knowledge–An
Analysis of the BRICS Nations. In Comparative Advantage in the Knowledge Economy.
Emerald Publishing Limited.
Contractor, F. J., Nuruzzaman, N., Dangol, R. and Raghunath, S., 2021. How FDI Inflows to
Emerging Markets Are Influenced by Country Regulatory Factors: An Exploratory
Study. Journal of International Management. 27(1). p.100834.