Question

The opening of the Indian economy has led to a rapid increase in Foreign Direct Investment and Foreign Exchange Reserves of the country. Defend or refute the given statement.

Answer 1

The opening of the Indian economy has led to a rapid increase in the country’s Foreign Direct Investment and Foreign Exchange Reserves, which is true because since 1991 India has removed trade and investment barriers, set up SEZs, offered tax breaks and labour flexibility, and launched investment-promoting initiatives, which attracted multinational firms and foreign capital. Consequently, FDI/FII rose from about US \$ 100 million in 1990-91 to roughly US \$ 76 billion by 2020-21, and foreign exchange reserves grew from about US \$ 6 billion to around US $ 633 billion by 2021. Thus, liberalisation led to rapid increases in both foreign investment and reserves, though the gains have not been uniformly distributed.