Foreign Collaboration In The Post- Independence Period

During the early phase of the planning era, the national policy towards foreign capital did recognize the need for foreign capital, but decided not to permit it a dominant position. Consequently, foreign collaborations had to keep their equity within the ceiling of 49% and allow the Indian counterpart a majority stake. Moreover, foreign collaborations were to be permitted in priority areas, more especially those in which we had not developed our capabilities. But in an overall sense, our policy towards foreign collaborations remained restrictive and selective. Consequently, during 1961-70,a total of 2,475 foreign collaborations were approved and during the next decade (1971-80) an another 3,041 collaborations were sanctioned.  It was only during the eighties that government relaxed its policy towards foreign collaborations. This was done specifically in respect of investors from Oil Exporting Developing countries with a well-defined package of exemptions.  This was followed by Technology Policy Statement (TPS) in January 1983. The objective of the policy was to acquire imported technology and ensure that it was of the latest type appropriate to the requirement and resources of the country. Under this policy, a number of policy measures were announced liberalizing the licensing provisions.  These technical collaborations were allowed on financial criteria i.e. , royalty or lump sum payment or a combination of both. These relaxations resulted in a larger inflow of foreign direct investment and consequently, the number of approvals during the decade (1981-90) reached a record figure of 7,436 involving a total investment of Rs.1, 274 crores. Country wise analysis of foreign collaborations reveals that USA was at the top accounting for nearly Rs.322.7 crores of investment. This was one-fourth of the total foreign collaboration approvals. This was followed by Federal Republic of Germany (17.2 per cent), Japan, U.K, Italy, France and Switzerland. Five countries i.e. USA, West Germany, Japan, U.K and Italy accounted for nearly 63 per cent of total approved foreign investment. Even Non-Resident Indians (NRIs) contributed about Rs.113 crores accounting for 8.9 per cent of total investment.