Comparatively very little foreign investment has taken place in India due to several reasons, some multinationals, Coca Cola and IBM, even left India in late 1970s as the government conditions were unacceptable to them.
A Common criticism against MNC’s is that they tend to invest in low priority & high profit sectors in developing countries, ignoring national priobities. However high technology and heavy investment sectors of national importance & export sectors. Firms which had been established non-priority areas prior to implementation of this policy have, however been allowed to continue in those sectors.
It is not a right approach to estimate the net impact of multinationals on foreign exchange reserves by taking net foreign exchange outflow or inflow. If a multinational is operating in an import substitution industry, the net effect in foreign exchange reserves could be favourable even if there is net foreign exchange outflow of company.
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