In 1991, the office of controller of the capital issues (CCI) was abolished, thereby allowing NRI and FII investments in the corporate sector and (larger) Indian firms could now secure long-term low-cost resources from international capital markets. While the Indian stock markets boomed as supply of long-term loanable funds to corporates rose sharply, a sizable portion of these funds was divested elsewhere as the ratio of gross fixed capital formation in manufacturing to supply of long-term funds came down significantly during this period. Though India received a significant jump in FDI over the previous decade, foreign firms’ share in fixed asset formation in the corporate sector remained low. Data suggests that FDI resources further went to acquiring managerial control in existing firms, intercorporate deposit, real estate – fueling property boom of the 1990s, takeover financing, trading existing capital stock leading to speculative activities. In essence, money came in the financial economy and not the re
al economy for India thereby diminishing fixed capital formation & infrastructure growth.