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at about 2 per cent or less of the total FDI inflows. Therefore, inflows through equity capital of the unincorporated bodies are the most significant component for India. When the components of FDI inflows are studied over a period of time, we find that the value of equity inflows of incorporated bodies declined between 2001-02 and 2003-04,but have been on an uptrend thereafter (Table 2.3).Inflows through reinvested earnings increased continuously through this period,with only 2003-04 as an exceptional year.Annual fluctuations were observed for the inflows under equity capital of unincorporated bodies. However, the value of inflows through other capital stagnated during this period. There are two main channels for the entry of FDI into India: the SIA/FIPB Route and the RBI Automatic Approval Route. From the inception of economic reforms in India in 1991 until the year 2000, most of the FDI came through the government route as there was strict monitoring of the approvals; therefore, FDI coming through the SIA/FIPB route was greater than the FDI coming through the RBI route (Table 2.4). However, there has been a dilution of this trend in the past five years. With the investment boom in India and different states competing for FDI, the government has eased foreign investment regulations leading to a spurt in FDI coming through the RBI route, which is a positive sign. During 1991, as much as 54.1 per cent of total FDI was channelled through the SIA/FIPB route in contrast to 45.9 per cent through the RBI route. No inflows on account of acquisition of existing shares were recorded for this year. The route-wise FDI inflows fluctuated till 1998. During 1998, the FDI inflows through the SIA/ FIPB route accounted for 62.1 per cent of the total FDI inflows, while those through the RBI’s automatic route touched an all-time low of only 7.3 per cent. However, by this year, inflows through acquisition had gained a significant share of 3.06 per cent in total FDI inflows.The following period until 2007, for which the latest figures are available, recorded an increase in share of inflows through the RBI’s automatic route,a decrease in the shares of inflows through the SIA/FIPB,while the share of inflows through acquisitions remained banded between 30 to 20 per cent. 2.5 Sector-wise FDI inflows Over the recent past, the sector-wise inflows of FDI have undergone a change. This is clear from the variation in the sector ranks based on their share in total FDI inflows. For comparison, we divide the period from August 1991 to March 2009 into two sub-periods of approximately the same length: the initial period of August 1991 to December 1999 and the second sub-period of 2000 to the latest available (which is the reference period of this study). Figure 2.2 Sector-wise FDI Inflows (Aug. 1991-Dec. 1999) Source: SIA Newsletters, January 2005 and April 2009. FDI SCENARIO IN INDIA: TRENDS AND POLICIES 15
FDI IN INDIA AND ITS GROWTH LINKAGES Table 2.5 presents the ranks, names and shares of FDI inflows for the top 20 sectors and miscellaneous industries (and, therefore, 21 industries in total), as reported in SIA publications. The figures are reported for the two cumulative periods and the year 2008 for which the latest information is available. The FDI inflows appear to be concentrated among the 21 industries. During the initial sub-period, namely, August 1991 to December 1999, the 21 sectors constituted 69.3 per cent of total FDI inflows, whereas during the second sub-period, namely, January 2000 to March 2009, these sectors constitute 84.3 per cent of the total FDI inflows. The emergence of the service sector is clear from a comparison of the shares over the two sub-periods. Other new sector entrants in the list of top five recipient sectors include computer software & hardware, construction activities and housing & real estate. The changing significance of the top five recipient sectors is shown in Figures 2.2 and 2.3. 2.5.1 FDI inflows in Manufacturing The manufacturing sector plays a significant role in the Indian economy, contributing nearly 17 per cent to the GDP (in 2008-09). Encouraged by the increasing presence of multinationals, the scaling up of operations by domestic companies and an ever-expanding domestic market, the Indian manufacturing sector has been averaging 9 per cent growth in the past four years (2004-08), with a record 12.3 per cent in 2006-07. Industry and manufacturing were the major contributors to the economy, having a consistently high GDP growth rate in the past two years, making India one of the fastest growing economies in the world. India has all the requisite skills in product, process and capital engineering, due to its long manufacturing history and higher education system. India’s cheap, skilled manpower is attracting a number of companies across diverse industries, making India a global manufacturing powerhouse. FDI inflows into manufacturing have been computed based on FDI records provided by DIPP. Table 2.6 shows that the share of FDI inflows in the manufacturing sector was as follows: electrical equipment (including s/w & elec.) occupied the highest share, i.e., 30.6 per cent during 2000-2007, followed by the transportation industry (9.9 per cent), fuels (power & oil refinery) (7.7 per cent), chemicals (other than fertilisers) (4.8 per cent) and drugs and pharmaceuticals (4.0). The remaining sectors have a share of less than 4 per cent in total FDI inflows in manufacturing. However, the share of manufacturing in total FDI inflows of India was 34.02 per cent in 2007. 16 Figure 2.3 Sector-wise FDI Inflows (Jan. 2000-March 2009) Source: SIA Newsletters, January 2005 and April 2009.
Page 2 and 3: FDI IN INDIA AND ITS GROWTH LINKAGE
Page 4: PROJECT TEAM Study Team Project Lea
Page 7 and 8: linkages with the economy. The sect
Page 10: Contents Executive Summary Chapter
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Page 16 and 17: Executive Summary Foreign direct in
Page 18 and 19: EXECUTIVE SUMMARY petroleum product
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Page 24 and 25: in India stood at $23 billion, show
Page 26 and 27: viii) Backward and Forward Linkages
Page 28 and 29: Chapter 2: FDI Scenario in India: T
Page 30 and 31: Secretariat for Industrial Assistan
Page 32 and 33: Table 2.2 shows that FDI outflows f
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Page 38 and 39: Table 2.7 FDI in India in the Servi
Page 40 and 41: Figure 2.4 Country-wise FDI Inflows
Page 42 and 43: 2.10 Foreign Technology Transfers A
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Page 46 and 47: Table 3.2 Short-term effects of FDI
Page 48 and 49: proportion of foreign investment in
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Page 54 and 55: in the eight major SEZ’s exports
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Page 60 and 61: SPECIAL ECONOMIC ZONES (SEZS) AND F
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FDI IN INDIA AND ITS GROWTH LINKAGE
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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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Table 7.7a Mode of Transport from F
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Table 7.8a Number of FDI-enabled Fi
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Chapter 8: FDI Data Reporting and C
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sector, non-profit institutions ser
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three categories, namely, (i) inves
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Table 8.1 Trends in FDI Inflows to
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FDI DATA REPORTING AND CLASSIFICATI
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Table 8.3 Trends in FDI Inflows by
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Table 8.5 DIPP Classification of FD
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SECTOR-WISE CODE 3700 DEFENCE INDUS
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S. No. DIPP DIPP Activity NIC 2-Dig
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Chapter 10: Key Findings and Salien
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Findings � About half the total o
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7. Forex Implications: To understan
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manufacturing firms taken together.
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References Australian Bureau of Sta
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for economic growth and poverty all
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Tables for Chapter 6
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