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

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SECONDARY DATA-BASED ANALYSIS We provide information on the top 25 NIC sectors based on the sectoral share of market capitalisation for the FDI firms. The information is also provided for net fixed capital and equity (foreign and domestic). In the case of FDI firms, the top 25 NIC sectors exhaust about 91 per cent of the total market capitalisation, 83 per cent of foreign equity and 84 per cent of net fixed capital. Market capitalisation of FDI firms accounts for 15 per cent of the total capitalisation (domestic plus FDI firms). The share of foreign equity in total equity across all firms (FDI-enabled and domestic) is 4.3 per cent. FDI firms account for 88 per cent of total foreign equity in the country. Thus, 12 per cent of the foreign equity has moved into domestic firms, implying an average share of 0.6 per cent in total equity holding of domestic firms. Across the FDI-enabled manufacturing firms, the maximum foreign equity has gone into iron and steel (271), followed by other chemical products (242); non-metallic mineral products (269); basic chemicals (241); and general purpose machinery (291). Small cities account for 46 per cent of market capitalisation, 44 per cent of foreign equity and 50 per cent of the net fixed capital of FDI firms (Table 6.24).10 However, the shares vary across sectors. The share of market capitalisation in small cities is significantly above the overall average of 46 per cent in sectors such as motor vehicles (341); growing crops, market gardening, and horticulture (011); non-metallic mineral products (269); basic iron and steel (271); transport equipment (359); and building of construction parts (452). The top 25 NIC sectors account for 92 per cent of the total market capitalisation in small cities. The corresponding shares are 74 per cent for foreign equity and 78 per cent for net fixed capital. Market capitalisation of firms producing chemical products (other than basic chemicals) has high clustering in Maharashtra, Karnataka, West Bengal, Himachal Pradesh and Goa (Table 6.25). The market capitalisation of firms producing precious and non-ferrous metals has high clustering in Maharashtra, Dadra & Nagar Haveli, Tamil Nadu, Madhya Pradesh and Andhra Pradesh. The market capitalisation of firms producing electricity distribution and control apparatus has high concentration in Maharashtra, Karnataka, Gujarat, Haryana and West Bengal. Maharashtra has relatively high clustering of market capitalisation of sectors such as chemical products, non-ferrous metals and medical appliances (Table 6.26). Karnataka has relatively high clustering of market capitalisation of sectors including motor parts, chemical products, and electricity distribution and control apparatus. Haryana has relatively high clustering of market capitalisation of sectors including transport equipment, motor vehicles, and electricity distribution and control apparatus. Gujarat has relatively high concentration of sectors including electricity generation and control apparatus, non-metallic mineral products, and chemical products. Tamil Nadu has relatively high concentration of nonferrous metals, petroleum products, and dairy products. The estimated market capitalisation of the foreign equity component in total equity in the manufacturing sector is Rs. 2,462 billion in the case of FDI-enabled firms and Rs. 189 billion in the case of the foreign equity component in the total equity of domestic firms (Table 6.27). Foreign equity is worth Rs. 18 billion in FDI-enabled service firms (31 per cent of total equity in FDI-enabled service firms); only 8 per cent of Rs. 18 billion worth of FDI has moved into Class-3 cities. Market capitalisation of FDIenabled service firms is at Rs. 2,956 billion; only 5 per cent originates in Class-3 cities (Table 6.28). 10.Values of equity, output, value-added, employment, net fixed capital and other related variables have been computed from firm-level information in Capitaline. City-level information is computed assuming equal distribution of these variables across all the plants of a firm. It also facilitates computation of distribution of values of these variables across cities of different sizes as well as across states. 63
FDI IN INDIA AND ITS GROWTH LINKAGES 6.3.3 Sectoral Spread of Output, Value-added and Employee Cost Although we had information for 3,107 domestic firms in our database, the number dropped to 3,075 after we deleted firms that did not have complete data on required variables (Table 6.29). However, complete data are available for all the 351 FDI firms. The FDI firms constitute one-tenth of the total firms in our database. The share of number of FDI firms in 3-digit NIC sectors is relatively high in medical appliances and instruments (331); motor parts (343); dairy products (152); general purpose machinery (291); electrical equipment (319); tobacco products (160); and TV and radio receivers (323). Information on sectoral output, value-added and employee cost is provided in Table 6.29. In the case of FDI firms, the share of the top 25 NIC sectors is 89 per cent in total output as well as in value-added, and 86 per cent in employee cost. The total output of all firms (FDI and domestic) in our database amounts to Rs. 21,514 billion, with Rs. 2,796 billion originating from FDI firms and the remaining Rs. 18,718 billion being produced by domestic firms. Thus, 13 per cent of the total output is produced by FDI firms. The share of FDI firms is nearly the same, i.e., 13 per cent, in the case of total value-added as well as employee cost. There are two notable observations. The share of value-added in all the FDI firms is 18 per cent of their output, which is close to the 18.4 per cent for domestic firms. This may be referred to as the depth of value-added. The share of the employee cost in value-added is 29.3 per cent for FDI firms and 28.7 per cent for domestic firms (Table 6.30). The share of employee cost to value-added may be referred to as the depth of returns to labour. However, the corresponding shares vary across the 3-digit NIC sectors. The share of value-added to output is relatively high in Andhra Pradesh, Gujarat and Karnataka (Table 6.31). Sectors with relatively high proportion of value-added in output, within FDI-enabled firms, include software publishing, consultancy and supply (722); mining of iron ores (131); growing crops, market gardening, and horticulture (011); motion pictures, radio, television and other entertainment (921); and non-metallic mineral products (269) among others (Table 6.30). Similar differences are observed in the case of the share of employee cost in value-added across sectors. While some sectors have ratios higher than the average (29.3 per cent), others have lower ratios. FDI firms with a relatively high proportion of employee cost in value-added include software and publishing (722); footwear (192); basic chemicals (241); textiles (171); and domestic appliances (293), among others. It is important to check the share of small cities in total output, value-added and employee cost of the FDI firms. This provides information on the extent of the reach of FDI into small cities. The FDI firms have significant penetration in small cities; 49 per cent of total output, 48 per cent of value-added and 45 per cent of total wages (employee cost) originates from small cities (Table 6.32). The corresponding proportions vary across 3-digit NIC sectors. The share of small cities is significantly high in sectors like non-metallic mineral products (269); transport equipment (359); construction parts (452); mining of iron ores (131); electrical equipment (319); growing of crops, market gardening and horticulture (011); and textiles (171). As already mentioned, the share of foreign equity in total equity (foreign plus domestic) is 4.3 per cent in our database. However, the corresponding share is 3.1 per cent in small cities, implying a relatively large presence of domestic equity in small cities (Table 6.33). There are wide variations across sectors. Some sectors have a relatively high share of foreign equity in total equity in small cities; these include dairy products (152); electrical equipment (319); footwear (192) and television and radio receivers (323), among others. 64
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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
Page 32 and 33: Table 2.2 shows that FDI outflows f
Page 34 and 35: at about 2 per cent or less of the
Page 36 and 37: Table 2.5 Sector-wise Break-up of F
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
Page 62 and 63: existing infrastructure, (b) exploi
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Page 70 and 71: construction (4200); fuels, includi
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Page 74: Table 5.5 Sector-wise FDI in India
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Page 94 and 95: the North and South zones, whereas
Page 96 and 97: PRIMARY SURVEY: ANALYSIS AND RESULT
Page 98 and 99: Table 7.1a Distribution of Surveyed
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Page 104 and 105: Table 7.6a Number of Employees in S
Page 106 and 107: Table 7.7a Mode of Transport from F
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Page 110 and 111: Chapter 8: FDI Data Reporting and C
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S. No. DIPP DIPP Activity NIC 3-Dig
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FDI DATA REPORTING AND CLASSIFICATI
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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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