Private Foreign Investment and Economic Development

Abstract

Like many of the developing countries, India’s economic and industrial development heavily depends on the availability of foreign exchange and advanced technical and managerial knowhow. Foreign aid from the various industrially advanced countries has thus far remained the main source in meeting these needs and fortunately India has received a huge amount of such aid from foreign countries. However, it is clearly realized by now that foreign aid alone is not enough to satisfy India’s needs of foreign exchange and managerial and technical know-how. Particularly since the 1958 foreign exchange crisis, India’s balance of payment position has been rapidly deteriorating. At the present time, her foreign exchange reserves are at the lowest ebb, and they might have slipped through the floor several times if the government had not borrowed some $200 million from the International Monetary Fund. Indeed, as the Finance Minister, Mr. Sachin Chaudhuri, pointed out in his recent budgetary speech, the shortages of food grains and foreign exchange are the two most important factors hindering India’s economic and industrial development.¹ It is therefore imperative that the government do solve these two chronic problems.