India must be the only country that loves FIIs but hates FDI

In the past two decades, FDI has come to play a major role in the internationalisation of business as well as the globalisation process. In response to changes in technology, growing liberalisation of the national regulatory framework governing investment in enterprises, and changes in capital markets, vast changes have occurred in the size, scope and methods of FDI. New information technology systems and decline in global communication costs have made management of foreign investments far easier than in the past. The sea change in trade and investment policies and the regulatory environment globally in the past decade, including trade policy and tariff liberalisation, easing of restrictions on foreign investment and acquisition, and the deregulation and privatisation of many industries, has probably been the most significant catalyst for FDI’s expanded role in many countries including India.But FDI is not always beneficial to the host countries. There are complaints that foreign firms exploit local labor and make no contribution to the wider economy, either through creating jobs, training workers, or in using local suppliers. Another grievance against foreign investment is that, although the theory suggests capital inflows, in practice FDI can be a drain on foreign exchange. More broadly, there is concern that the interests of foreign firms diverge from social objectives or that their presence restricts the ability of governments to promote development. 

Dr.C.Murukadas,   The Economic Times, July 29, 2012