India’s International Migration of Labor, Currency Valuation, Foreign Direct Investment and the Role of Multinational Enterprises

   

International migration labor 

Increasing internationalization of production, trade and finance, globalization of economic networks, liberalization of the movement of capital and technology, rapid population growth in the South, high economic growth and low fertility in the newly industrializing countries are all factors that may exert additional pressure both in the migrant-sending and migrant-receiving countries for larger international flow of skilled and unskilled labor in the immediate decades to follow.

In India, the migration of its labor force within and across its national boundaries is nothing new. Two distinct types of labor migration have been taking place from India.  The first is characterized by a movement of persons with technical skills and professional expertise to the industrialized countries like the United States, Britain and Canada, which began to proliferate in the early 1950s. The second type of migration pertains to the flow of labor to the oil exporting countries of the Middle East, which acquired substantial dimensions after the dramatic oil price increases of 1973-74 and 1979. The nature of this recent wave of migration is strikingly different, as an overwhelming proportion of these migrants are in the category of unskilled workers and semi-skilled workers skilled in manual or clerical occupations.

Currency Valuation

 The value of a currency depends on factors that affect the economy such as imports and exports, inflation, employment, interest rates, growth rate, trade deficit, political factors, performance of equity markets, foreign exchange reserves, foreign investment inflows, banking capital, and commodity prices.

The Reserve Bank of India controls the issuance of the currency. The currency value of an economy influences the growth rate of GDP in an economy. The valuation of the Indian currency highly depends on reserve bank of India that manages the balance of payment, small modification in which can define the over or the under valuation of Indian currency.

 

  In last few months what we have seen is a weakening Indian Rupee. So it means something is not going right in Indian economy and if economy is not doing well it directly impact our investments. India is a country, which is heavily dependent on Oil Imports, and any change in oil prices directly effects the inflation in the country.The currency value of an economy influences the growth rate of GDP in an economy. Depreciating Rupee levels will increase the cost of Oil for India. Oil is imported by India in US Dollars, so a depreciating Indian Rupee will increase the cash paid for every barrel of oil Imported by India. Weakening currency is directly linked with weakening Indian economic strength and appreciating Rupee means Indian economy is becoming stronger fluctuation of Indian Rupee (currency) affects the decisions of investors while making investments.

 Conclusively, there are many factors that arise from the economic structure of Indian economy and affect the valuation of the Indian currency that in turn affects the economic growth rate of the economy of a country.

Foreign Direct investment ( FDI )
Foreign Direct Investment (FDI) in India is governed by the FDI Policy announced by the Government of India and the provisions of the Foreign Exchange Management At (FEMA), 1999.
 

Foreign Investment is freely permitted in almost all sectors except those sectors specifically restricted/prohibited. Under Foreign Direct Investment scheme investments can be made by non-residents in the shares/convertible debentures of an Indian company, under two routes; Automatic Route and Government Route. Under the Automatic Route, the foreign investor or the Indian company does  not require any approval from the from the Reserve Bank or Government of India for the investment Under the Government Route, prior approval of Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required. Benefit of FDI in India: generation employment and productivity enhancement, encourages the transfer of management skill, intellectual property and technology, increase in tax revenue and increase in exports.

  
Multinational enterprises (MNE)

Multinational enterprises play a vital role in the economic activity of most developing countries. In India MNE affiliates dominate whole sectors of industry - such as plastics and pharmaceuticals - characterized by a high degree of product differentiation, complex technology and high skill intensity. Such advantages, combined with intangible assets, centralized decision making and global outlook lead to a divergence of approach between MNEs and their local counterparts in host developing countries.