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

FDI IN INDIA AND ITS GROWTH LINKAGES
In order to check the geographical spread of the FDI firms vis-à-vis domestic firms, we categorised the firms based on
the number of states in which they had plant locations (Tables 6.20 and 6.21). Such a spread has been computed for
firms having plants in one or more states.
There are 190 (out of 351) FDI firms with plants in only one state with 317 (out of 1,171) plants. This implies that
there are about 2 plants per FDI manufacturing firm and about 57 per cent of these plants are located in Class-3 cities.
72 FDI firms have 248 plants spread over two different states, with 60 per cent of the plants located in Class-3 cities.
Fewer firms have plants spread over three or more states. Eleven FDI firms have plants spread over five different states,
with a total of 96 plants, and the remaining 15 firms have an even wider spread (more than five states), with a total of
207 plants. The average number of plants per firm is greater in wider-spread firms than in less-spread firms. While firms
with plants in only one state have 1.7 plants per firm, those with a spread across five states have 8.7 plants per firm, and
for firms with plants spread across more than five states, the number shoots up to 13.8. However, it may be noted that
the average number of plants per firm in one state remains nearly uniform over firms with plants spread over one to five
states, although it increases for firms with plants spread over more than five states. About 53 per cent of the FDI
manufacturing plants (622 out of 1,171) are located in Class-3 cities (Table 6.20).
The scenario is strikingly similar in the case of domestic manufacturing firms. There are 3,107 firms with 8,485 plants,
thus implying 2.7 plants per firm on average (Table 6.21). About 54 per cent of the domestic manufacturing firms are
located in Class-3 cities. The average number of plants per firm as well as the number of plants per firm per state across
the state-wise spread of firms closely matches that of the FDI manufacturing firms. For example, the average number
of plants per firm for firms with plants in only one state is 1.6 for domestic manufacturing firms and 1.7 for FDI
manufacturing firms. The corresponding number of plants per firm for firms spread across five states is 8.9 for domestic
manufacturing firms and 8.7 for FDI manufacturing firms. The average number of plants per firm per state is in the
range of 1.7 and 1.8 in both cases, viz., domestic and FDI firms.
About 72 per cent of the FDI-enabled 1,171 plants (841 plants) are concentrated in seven states (Table 6.22).
Maharashtra has the highest number of plants followed by Tamil Nadu, Gujarat, Andhra Pradesh and Karnataka. About
41 per cent of the 841 plants are concentrated in Class-3 cities. Within Karnataka, the share of FDI-enabled
manufacturing plants in Class-3 cities is 49 per cent.
6.3.2 Sectoral Spread of Equity, Fixed Capital and Market Capitalisation
Capitaline database provides an NIC 3-digit code for each firm. It also provides information on foreign and domestic
equity, market capitalisation and net fixed capital. This enables us to check the spread of these variables across NIC
3-digit sectors8 (Tables 6.23-6.31). All the 351 FDI firms and 3,107 domestic firms have been distributed across 101
3-digit NIC sectors. It may, however, be noted that some of the domestic firms also have foreign equity participation,
albeit less than 10 per cent of the total equity.
The market capitalisation of all firms (FDI and domestic) is estimated at Rs. 32,309 billion, including Rs. 4,870 billion
for the FDI firms. The all-India total equity capital in FDI and domestic sectors is Rs. 1,316 billion, with Rs. 1,203
billion in domestic firms and Rs. 113 billion in FDI firms (Table 6.23). The foreign equity component is Rs. 56.2 billion,
with Rs. Rs. 49.4 billion in FDI firms and Rs. 6.8 billion in domestic firms. 9
8. Equity capital is computed on the basis of the face value of the shares and not at market valuation.
9. Equity amount is based on the book value of assets and hence is Rs. 56 billion worth of foreign equity, which does not match FDI inflows. While mergers
and acquisitions pay for shares at market prices greenfield FDI also pays the premium over and above the face value of the shares at the time of buying
new issues. In order to find a proxy estimate for FDI inflows, we have computed market capitalisation of foreign equity shares. It turns out to be Rs.
2,65,106 crore.
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