Embryonic journey hurdled by jagged space: A case study of transparency and its impact on foreign direct investment in India

• Main Authors: Singh, Aishwarya, Tyagi, Vinay
• Format: Conference or Workshop Item
• Language: English
• Published: 2007
• Subjects: HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/2345/1/Aishwarya_Singh_.pdf; http://repo.uum.edu.my/2345/
• Institution: Universiti Utara Malaysia

Foreign direct investment (FDI) has become a key part of national development strategies for many countries. They see such investments as strengthening domestic capital, productivity, and employment, all of which are crucial to jump-starting economic growth. While many highlight FDI’s positive effects, others blame FDI for "crowding out" domestic investment and lowering certain regulatory standards. While FDI’s impact depends on many conditions, well-developed and implemented policies can help maximize its gains. Transparency is another indispensable ingredient which warranties sustenance of high capital flows in an economy. Transparency, in order to be better scrutinized has to be analyzed from two perspectives. First aspect is analyzing set of government policies that increase the risk and uncertainty faced by foreign investors. Uncertainty stems from the presence of bribery and corruption, unstable economic policies, weak and poorly enforced property rights, and inefficient government institutions. High levels of non-transparency can greatly retard the amount of foreign investment that a country might otherwise expect. The second aspect of transparency that has been discussed is Transparency between sellers and buyers, that we call capital-market transparency; and transparency between managers and owners, that we call corporate-governance transparency.