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

FDI IN INDIA AND ITS GROWTH LINKAGES
It can be observed that there is a decline in all three city classes when FDI manufacturing plants are compared with
domestic manufacturing plants. In the case of Class-1 cities, the number drops from 27 having domestic plants to 23
having FDI plants, though many of these would be common. The corresponding decline is from 44 to 24 in the case of
Class-2 cities. The decline is quite significant in the case of Class-3 cities; while 998 Class-3 cities have domestic
manufacturing plants, only 247 have FDI manufacturing plants. However, many of these cities would be common
between the two types of manufacturing plants.
6.2.3 Manufacturing Firms’ Plants: Comparative Location across Country
As noted earlier, manufacturing plants are spread over 1,118 cities according to the data in the Capitaline database.
However, the data for 50 cities is provided only for FDI manufacturing plants and not for domestic plants
(Table 6.11); on the other hand, 824 cities have information only on domestic manufacturing plants. The cities for
which information is available either for only FDI manufacturing firms or for only domestic manufacturing firms
are referred to as “unmatched cities” in this study. There are 244 cities for which plant-level information is
provided for both FDI and domestic firms; these are termed “matched cities” in this study. However, this does not
imply that alternative categories of manufacturing plants, FDI and domestic, do not exist in unmatched cities
though the information is not available in the Capitaline database. Thus, there may still be some FDI manufacturing
plants in the 824 unmatched cities on which information is available only for domestic manufacturing firms
and vice versa.
There are 1,273 FDI plants located in 294 cities. These include 51 manufacturing plants located in 50 unmatched cities
and 1,222 plants located in 244 matched cities (Table 6.12). In the case of domestic manufacturing plants, 2,330 plants
are located in 824 unmatched cities and 8,335 in 244 matched cities. Thus, 80 per cent of all 11,938 manufacturing
plants are located in 244 matched cities (22 per cent of 1,118 cities).
As observed, FDI manufacturing plants are located in 294 cities though their co-existence with domestic manufacturing
plants is documented in 244 matched cities. All the 50 unmatched cities are Class-3 cities. In the case of matched cities,
more than 80 per cent are Class-3 and less than 10 per cent are Class-1 (Table 6.13). Such a pattern of Class-3 cityconcentration
is similar across the board in most of the major states. The share of Class-3 cities is 80 per cent or above
in Andhra Pradesh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Tamil Nadu and West Bengal with the share
touching 93 per cent in Haryana and 87 per cent in Gujarat. However, the share of Class-3 cities among the matched
cities is relatively low, at 61 per cent, in Maharashtra.
The simultaneous existence of domestic and FDI manufacturing plants in matched cities is important from the point of
view of agglomeration economies. The two types of manufacturing plants appear to have reinforced each other’s presence
in cities across various states.
The distribution of domestic manufacturing plants across states indicates that there are 8,335 plants across 244 matched
cities with 3,754 plants (45 per cent) in Class-3 cities (Table 6.14). The share of domestic manufacturing plants in Class-
3 cities varies across the major industrial states, from as high as 57 to 58 per cent in Andhra Pradesh and Gujarat to as
low as 19 per cent in Maharashtra and 24 per cent in Karnataka.
The distribution of FDI manufacturing plants across states indicates that there are 1,222 plants across 244 matched
cities with 640 plants (52 per cent) in Class-3 cities (Table 6.15). The share of FDI manufacturing plants in Class-3
cities varies across the major industrial states, from as high as about 83 per cent in Haryana, and 60 per cent in Andhra
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