Foreign Equity Investment in India: Trends, Policy Priorities and the 'Legitimacy Capital'

Chapter 6

Foreign Equity Investment in India: Trends, Policy

Priorities and the 'Legitimacy Capital'

Gautam Ray, Kyoto University

Introduction

India presents an intriguing story of foreign equity investment unraveling in recent years in an

interesting manner. The aggregate FDI inflow in fifteen years between 1991-92 and 2004-05 was a

meager $33.3 billion-an amount Russia and Brazil attracted in about two years and China attracted

in less than six months during the middle of last decade. Such a low level of FDI inflow defied easy

explanations, particularly because during this period India had been growing at an astoundingly

high average annual rate of 6%. In 2006-07 India saw a sudden steep increase in foreign equity