India's Recent Inward Foreign Direct Investment: An Assessment

KS, Chalapati Rao and Dhar, Biswajit (2018): India's Recent Inward Foreign Direct Investment: An Assessment. Published in: (July 2018)

Abstract

Most often the reported FDI flows are accepted unquestioningly and are analysed and interpreted in a simplistic manner in spite of their many nuances. The discovery of some serious limitations and specific features of India’s FDI inflows adds a hitherto little discussed dimension which impacts the understanding of the flows significantly.

The study, India’s Recent Inward Foreign Direct Investment: An Assessment, published in July 2018, vividly explains the various shortcomings and special features of the data using multiple examples and case studies and demonstrates that the annual aggregates cannot provide adequate guidance regarding the year-to-year changes. Nor do they truly reflect capacity creation in the economy. The problem turns out to be more acute at the sectoral level.

The study conveys a strong message that the reporting mechanism and analysis have to be reshaped drastically in order to provide reliable guidance to policymakers and other national and international users. It could provide a template for understating the inflows into developing countries, in general.

• Item Type: MPRA Paper
• Language: English
• Keywords: FDI, India, Make in India, RBI, Foreign Direct Investment, Data issues, OECD, UNCTAD, World Bank, Industrial Policy, Repatriation, Private Equity, DIPP, BoP, Remittanes
• Subjects: F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; F - International Economics > F3 - International Finance; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; P - Economic Systems > P4 - Other Economic Systems > P45 - International Trade, Finance, Investment, and Aid

References

Joseph E. Stiglitz, The state, the market, and development, WIDER Working Paper 2016/1, January 2016.

John Williamson, “Did the Washington Consensus Fail?”, November 6, 2002.

Stephen D. Cohen, Multinational Corporations and Foreign Direct Investment: Avoiding Simplicity and Embracing Complexity, Oxford University Press, New York, 2007.

Frederick Nixson, “New Directions of Foreign Direct Investment and Industrial Development”, in John Weiss and Michael Tribe (Eds.), Routledge Handbook of Industry and Development, London and New York, 2016.

UNCTAD, World Investment Report, 2006.

G.K. Helleiner, “Transnational Corporations and Direct Foreign Investment”, in Hollis Chenery and T. Srinivasan (eds.), Handbook of Development Economics, Vol. 2, Elsevier, 1989.

Roberto Echandi Jana Krajcovicova Christine Zhenwei Qiang, “The Impact of Investment Policy in a Changing Global Economy: A Review of the Literature”, World Bank Policy Research Working Paper, No. 7437, October 2015. Harry G. Johnson, “Survey of the Issues” in Peter Drysdale (ed.), Direct Foreign Investment in Asia and the Pacific, Australian National University Press, 1972.

Kiyoshi Kojima, “International Trade and Foreign Investment: Substitutes or Complements”, Hitotsubashi Journal of Economics, Vol. 16, Issue No. 1, 1975. Ragnar Nurkse, Problems of Capital Formation in Underdeveloped Countries, Oxford University Press, Bombay, 1972.

Biswajit Dhar, “State Regulation of Foreign Capital in India”, ISID Working Paper No. 006, 1988. India, National Manufacturing Competitiveness Council, Report of the Prime Minister’s Group: Measures for Ensuring Sustained Growth of the Indian Manufacturing Sector, September 2008.

Department of Industrial Development, Ministry of Industrial Development, Internal Trade and Company Affairs, Report of the Industrial Licensing Policy Inquiry Committee (Main Report), July 1969. Planning Commission, Report of the Steering Group on Foreign Direct Investment (Chairman: N.K. Singh), August 2002.

Ministry of Finance, Report of the Dr Arvind Mayaram Committee on Rationalizing the FDI/FII Definition, June 2014.

OECD, OECD Benchmark Definition of Foreign Direct Investment, Fourth Edition, 2008.

RBI, Balance of Payments Manual of India, September 2010.

K.S. Chalapati Rao and Biswajit Dhar, “Analysis of India’s FDI Inflows during 2004-05 to 2013-14”, in India’s Inward FDI Experience in the Post-liberalisation Period with Emphasis on the Manufacturing Sector, a project report submitted to the ICSSR, Institute for Studies in Industrial Development, January 2016.

Karl P. Sauvant, “Beware of FDI statistics!”, Columbia FDI Perspectives, No. 215, December 18, 2017.

UNCTAD, World Investment Report: 2017.

UNCTAD, Training Manual on Statistics for FDI and the Operations of TNCs, Volume I: FDI Flows and Stocks, 2009.

India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, “Industrial Policy – 2017: A Discussion Paper”, August 29, 2017.

UNCTAD, World Investment Report, 2016

NCAER, Enhancing the Scope and Quality of FDI Statistics, Report No. 2016-03-1, March 2016.

Ministry of Industrial Development and Company Affairs, Committee on Foreign Collaboration, May 1967.

K.S. Chalapati Rao and Biswajit Dhar, India’s FDI Inflows: Trends and Concepts, 2011.

National Academies of Sciences, Engineering, and Medicine, Genetically Engineered Crops: Experiences and Prospects, The National Academies Press, Washington DC, 2016.

Reserve Bank of India, Annual Report: 2016-17.

Ministry of Commerce and Industry, DIPP, Electronics and IT Sector: Achievements Report, November 8, 2016 United Nations, The Development Dimension of FDI: Policy and Rule-Making Perspectives, New York and Geneva, 2003.

Sanjaya Lall and Rajneesh Narula, “Foreign Direct Investment and its Role in Economic Development: Do We Need a New Agenda?”, The European Journal of Development Research, Vol. 16, No. 3, Autumn 2004.