fdi in india and its growth linkages - Department Of Industrial Policy ...

three categories, namely, (i) investment of a non-resident direct investor in resident direct investment enterprises, (ii)
reverse investment of non-resident direct investment enterprises in resident direct investors and (iii) investment of nonresident
fellow enterprises in resident fellow enterprises. These categories under the asset/liability principle can be
further subdivided into sub-classes according to the residence of the ultimate controlling parent, that is, the direct
investor at the top of the control chain. These classes can also be grouped by industrial activity and the residence of the
FDI partners. Further, FDI accounts are presented in three blocks, viz., FDI positions, 5 FDI transactions and FDI
income. Information on these blocks can be obtained from the balance sheet entries of direct investors, direct investment
enterprises and fellow enterprises.
However, under the directional principle the presentation of FDI statistics requires rearrangement of some of these
building blocks. In case the direct investment enterprise holds less than 10 per cent of the voting power in its direct
investors, any inverse investment (either equity or debt) from the direct investment enterprise to its direct investor is to
be accounted for under outward or inward appropriately, as opposed to the asset/liability equivalent. Further, recording
of transactions and positions between fellow enterprises under the directional principle is to be made appropriate by
bringing modifications where necessary to their asset/ liability equivalents to provide the directional information. 6 The
presentation of data under the directional principle is the preferred one, especially for industry and country classification
of FDI data.
8.8 Industry Classification of FDI Statistics
For better economic planning and decision making, investment enterprises should be grouped by type of economic or
industrial activity. It should be made available both for inward and outward foreign direct investment by both the
industry of direct investment enterprise and the industry of direct investor. In case the data cannot be compiled for both
types, the Benchmark Definition recommends that the data should be compiled at least according to the activity of the
direct investment enterprises, and this should be compiled for both inward and outward direct investment. The inward
investment should reflect the industry of the resident direct investment enterprise and outward investment should show
the industry of the non-resident direct investment enterprise.
Even though many direct investors and direct investment enterprises are involved in a wide range of economic activities,
they must be classified into a single industry. In fact, the industry classification should be based on the principal
economic activity, which can be determined based on the contribution of an activity to the value-added of the enterprise.
Further, the presentation of the data should be based on the reporting enterprise. That is, if the reporting entity is a
direct investment enterprise and, at the same time, a direct investor, its industry classification should be based on
activities it conducts and should exclude activities conducted by its own FDI enterprises. In the case of subsidiaries,
associates and branches of an enterprise, the industry of the enterprise should be the principal activity of that enterprise
only. For international comparison and statistical consistency, the OECD Benchmark Definition recommends the use
of the International Standard Industry Classification (ISIC) for compiling FDI statistics. 7
8.9 Distribution of FDI by DIPP Classification
This section presents the distribution of FDI compiled from company records received from DIPP, which we used to
prepare unique companies for drawing of samples. As mentioned, the distribution of FDI includes only FDI received
by different companies in a particular year and does not include stock swaps, advance inflows, NRI schemes and other
miscellaneous receipts. Table 8.1 shows the FDI inflows from 2000 to 2007. In terms of US dollars, FDI inflow
increased from US$2 billion in 2000 to US$11 billion in 2006. Despite the slowdown in investment during 2003, it has
5. FDI position shows the level of investment at a given point of time. It is also referred to as FDI stocks.
6. For details, see OECD (2008), Chapter 4.
7. For details, see OECD (2008), Chapter 7.
FDI DATA REPORTING AND CLASSIFICATION
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