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

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7. Forex Implications: To understand the implications of repatriation of profits earned in India versus profits retained and invested Findings � There is no restriction on repatriation of profits � The overall net foreign exchange earning is negative for FDI-enabled manufacturing sectors. The same is true of domestically invested manufacturing sectors � The sector of petroleum products accounts for a major share of the overall deficit on foreign exchange earnings for both FDI-enabled and domestically invested sectors of production � Sectors with positive net foreign exchange earnings include chemicals; mining of iron ores; textiles; and software and publishing Conclusions The overall net foreign exchange earning is negative for FDI-enabled as well as domestically invested firms mainly due to deficit in the manufacture of petroleum products. Sectors with positive net foreign exchange earnings include chemicals; mining of iron ores; textiles; and software and publishing. 8. Backward and forward linkages: To estimate the backward and forward linkages of FDI-enabled sectors through mapping these on the latest available input-output tables for India Findings � The top FDI-attracting DIPP 4-digit sectors have strong backward and forward linkages with other sectors of the economy � Four sectors among the top 15 FDI-receiving sectors have strong backward and forward linkages with other sectors of the economy: miscellaneous industries including construction; fuels including power and oil refinery; chemicals other than fertilisers; and metallurgical industries � Eight sectors have strong backward linkages, viz., electrical equipment; transportation industry; drugs and pharmaceuticals; cement and gypsum products; food-processing industries; hotel and tourism; miscellaneous mechanical & engineering; and textiles � The remaining three aggregate DIPP sectors have strong forward linkages. These are the service sector; telecommunications; and consultancy services Conclusions The top FDI-receiving sectors, as per the DIPP 4-digit classification, have strong backward and/or forward linkages with the economy. Sectors with strong backward and forward linkages include construction, fuels, chemicals, and metallurgical industries. Sectors with strong backward linkages include electrical equipment, drugs and pharmaceuticals, food processing, and textiles, among others. Services sectors, telecommunications, and consultancy services have strong forward linkages. 9. FDI in Service Sectors: To study the impact of FDI in service sectors on the rural economy KEY FINDINGS AND SALIENT CONCLUSIONS Findings � Market capitalisation of the FDI-enabled service firms is Rs. 2,956 billion compared with Rs. 4,870 billion of the FDI-enabled manufacturing sectors. Sectors with high market capitalisation include telecommunications; software publishing and consultancy; transport services; and construction activities 137
FDI IN INDIA AND ITS GROWTH LINKAGES � FDI in service sectors has an insignificant presence in Class-3 cities � The share of market capitalisation in Class-3 cities accounts for about 5% of the total market capitalisation of the FDI-enabled service sectors � The share of foreign equity in Class-3 cities accounts for about 8% of the total foreign equity of the FDI-enabled service sectors � The share of net fixed capital in Class-3 cities accounts for about 14% of the total net fixed capital in the FDIenabled service sectors � Only 10.4% of the output of FDI-enabled service facilities originates in Class-3 cities � Only 10% of the value-added of FDI-enabled service facilities originates in Class-3 cities Conclusions Market capitalisation of the FDI-enabled service firms is less than two-fifth the combined market capitalisation of manufacturing and service firms. However, it has insignificant reach in Class-3 cities compared with the impressive presence of FDI-enabled manufacturing firms in Class-3 cities. Only one-tenth of output and value-added of the FDIenabled service sectors originates in Class-3 cities. 10. Special Economic Zones: To study the concentration of production facilities in SEZs, and analyse the relative performance of such plants inside and outside SEZs and the impact of such production on the Index of Industrial Production Findings � The secondary database does not have information on FDI in SEZs � As of March 31, 2008 total investment in SEZs was Rs. 693 billion including FDI investment of Rs. 55 billion: Rs. 26 crore by the developers and Rs. 29 crore by the units established in SEZs � Total exports from SEZs in 2007-08 amounted to Rs. 666 billion � As of December 31, 2008 the total employment generated by SEZs was 3,66,333 persons. Conclusions The secondary database does not have information on the amount of FDI or the number of FDI-enabled firms/plants in Special Economic Zones. However, we do have information on the number of FDI plants located in cities having SEZs but not on whether these firms are within or outside a particular SEZ in a specified city. The FDI component accounts for about 8% of the total investment in SEZs. 11. Export Potential: To assess the share of export-seeking FDI in various sectors of production to gauge the untapped potential of exports of labour-intensive goods from India Findings � FDI-enabled manufacturing firms account for 13% of total sales by all firms: FDI and domestic � FDI-enabled manufacturing firms account for 12% of exports by all firms: FDI and domestic � Exports constitute 13% of total sales of FDI-enabled manufacturing firms � Mining of iron ores; non-ferrous metals; special purpose machinery; textiles; and software and publishing have relatively high export-to-sales ratios Conclusions FDI-enabled manufacturing firms account for 12% of total exports by FDI-enabled and domestically invested 138
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FDI IN INDIA AND ITS GROWTH LINKAGE
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PROJECT TEAM Study Team Project Lea
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linkages with the economy. The sect
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Contents Executive Summary Chapter
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Chapter 5: FDI: Linkages with the E
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Executive Summary Foreign direct in
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EXECUTIVE SUMMARY petroleum product
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Chapter 1: Introduction 1.1 Backdro
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section industry data. However, the
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in India stood at $23 billion, show
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viii) Backward and Forward Linkages
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Chapter 2: FDI Scenario in India: T
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Secretariat for Industrial Assistan
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Table 2.2 shows that FDI outflows f
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at about 2 per cent or less of the
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Table 2.5 Sector-wise Break-up of F
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Table 2.7 FDI in India in the Servi
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Figure 2.4 Country-wise FDI Inflows
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2.10 Foreign Technology Transfers A
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Chapter 3: Mergers & Acquisitions a
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Table 3.2 Short-term effects of FDI
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proportion of foreign investment in
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Chapter 4: Special Economic Zones (
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4.4 Management of SEZs SEZs are und
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in the eight major SEZ’s exports
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Foreign Direct Investment in SEZs S
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In a span of a few years, there hav
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SPECIAL ECONOMIC ZONES (SEZS) AND F
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existing infrastructure, (b) exploi
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Chapter 5: FDI: Linkages with the E
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construction (4200); fuels, includi
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FDI: LINKAGES WITH THE ECONOMY S. N
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Table 5.5 Sector-wise FDI in India
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Chapter 7: Primary Survey: Analysis
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the North and South zones, whereas
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PRIMARY SURVEY: ANALYSIS AND RESULT
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Table 7.1a Distribution of Surveyed
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Table 7.2b Zone-wise Distribution o
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Table 7.3b Zone-wise Distribution o
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Table 7.6a Number of Employees in S
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Questionnaires
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QUESTIONNAIRE 257
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