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

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SECONDARY DATA-BASED ANALYSIS 6.3.4 Employment Generation The total number of people employed in FDI plants is about 15,64,920 (Table 6.34).11 This amounts to a share of between 4 and 5 per cent of the total labour force in the formal sector.12 More than 50 per cent of the total employment in the FDI manufacturing sectors originates in small cities. The top-25 NIC 3-digit sectors account for 80 per cent of the total FDI employment in large cities and 86 per cent of the total FDI employment in small cities. The share of employment in small cities varies across NIC sectors; it is relatively high in sectors where employee cost is higher than the overall average of 45 per cent originating in small cities. Two sectors that provide relatively high shares of total employment in FDI plants include chemical products (242) and growing and processing crops, including tea and horticulture (011). While 3-digit NIC Sector 242 provides employment to about 16 per cent of the total employment in FDI firms, the corresponding value for NIC Sector 011 is about 14 per cent. While 49 per cent of the employment generated by chemical products originated in small cities, the corresponding proportion is 93 per cent in processing crops, including tea and horticulture (011). Employment originating in FDI manufacturing firms varies widely across states (Table 6.35). About 20 per cent of the total employment is in Maharashtra. The corresponding share is 12.5 per cent in Karnataka, 8.8 per cent in West Bengal, 7.4 per cent in Haryana, 6.9 per cent in Assam, 6.3 per cent in Tamil Nadu, 6.2 per cent in Gujarat and 5.8 per cent in Andhra Pradesh. These eight states account for about three-fourth of the total manufacturing FDI sector employment. Other states account for lower employment shares. While Maharashtra has only about 19 per cent of the total employment in FDI plants in small cities, the proportion is nearly 100 per cent in the case of Assam. The corresponding proportion is 21 per cent in Karnataka; 82 per cent in Haryana; 39 per cent in Tamil Nadu; 57 per cent in Gujarat; and 40 per cent in Andhra Pradesh. Thus, FDI plants in Assam, Gujarat and Haryana have relatively high proportions of employment in small cities. 6.3.5 Export Intensity FDI firms account for 13 per cent of the total sales turnover and 12 per cent of export by all firms, both domestic and FDI (Table 6.36). FDI firms have a sales turnover of Rs, 2,994 billion out of the total sales turnover of Rs. 22,665 billion (FDI and domestic firms taken together). Exports of FDI firms are valued at Rs. 378 billion out of total exports of Rs. 3,069 billion. While some sectors have a relatively low share of the contribution of FDI firms in total sales turnover and exports, others have relatively high corresponding shares. FDI firms in 3-digit NIC sectors including refined petroleum products (232), basic chemicals (214) and textiles (171) contribute sectoral shares much lower than the overall averages in sales turnover and exports. However, FDI firms play an important role in sectoral sales turnover and exports in sectors such as chemical products (242); electricity distribution and control apparatus (312); medical appliances and instruments (331); motor parts (343); dairy products (152); transport equipment (359); mining of iron ores (131); and electrical equipment (319). About 13 per cent of total sales of FDI firms are exported. This is referred to as “export intensity”. Some sectors have a relatively high share of exports in total sales, while others are on the low side. The corresponding share in some of the important sectors is 80 per cent in mining of iron ores (131), 50 per cent in basic precious and non-ferrous metals (272), 31 per cent in software publishing, consultancy and supply (722), 26 per cent in textiles (171) as well as in special purpose 11.This number is computed by adding sectoral employment. Sectoral employment is computed as the ratio of sectoral employee cost to sectoral wage rate; sectoral wage rate is taken from the Annual Survey of Industries (ASI), Government of India. This may be an approximation but we could not arrive at a better estimate. 12.Based on 40 per cent workers' participation rate and 8 per cent share of the organised sector. 65
FDI IN INDIA AND ITS GROWTH LINKAGES machinery (292), 24 per cent in wearing apparel (181), 20 per cent in basic iron and steel (271), and 18 per cent in electrical equipment (319). Export intensity is relatively low in sectors such as electricity distribution and control apparatus (312), motor vehicles (341), non-metallic mineral products (269), medical appliances (331), dairy products (152), transport equipment (359), refined petroleum products (232), footwear (192), tobacco products (160), domestic appliance (293) and radio and TV receivers (323). Net foreign exchange (forex) earnings of FDI as well as domestic firms are negative. 13 The net forex deficit amounts to 2,794 billion, with FDI firms accounting for Rs. 311 billion (11 per cent) of this deficit. Some sectors have a surplus on net forex earnings; these include chemical products (242), building and construction parts (452), mining of iron ores (131), textiles (171) and software publishing, consultancy and supply (722). Manufacture of refined petroleum products (232) is the largest forex deficit-incurring sector. Other such sectors include basic precious and non-ferrous metals (272), iron and steel (271) and basic chemicals (241). 6.3.6 Labour Wage Intensity An important issue in assessing the impact of FDI firms is their ability to generate employment and provide returns to labour in these firms. Employee cost can be taken as a proxy for payment to workers. We define “labour wage intensity” as the employee cost incurred per unit of net fixed capital. The ratio of employee cost to net fixed capital turns out to be 19 paise per rupee for FDI firms (Table 6.37); the corresponding ratio is 15 paise for domestic firms. Hence, the labour wage intensity in FDI firms is about 25 per cent higher than in domestic firms. Certain sectors have relatively high labour wage intensity for FDI firms. The software development and publishing sector (722) provides the highest returns to its employees in terms of per unit of their net fixed capital, followed by footwear (192), medical appliances (331) and electricity distribution and equipment (312), among others. The corresponding values for domestic firms are relatively low in all these sectors. 6.3.7 Output to Capital Ratio Output to capital ratio is an indicator of production per unit of capital. Some sectors produce more output per unit of capital, while others produce less. In our database, the FDI firms produce Rs. 3.55 worth of output per rupee of net fixed capital, compared with Rs. 2.92 for domestic firms (Table 6.37). The output to capital ratio for the FDI firms is relatively high for sectors such as medical appliances and instruments (331), electricity distribution and control apparatus (312), refined petroleum products (232), mining of iron ores (131) and transport equipment (359), among others. The corresponding values for domestic firms are relatively low in all these sectors. 6.3.8 Plant-Level Average Labour and Capital Intensity Class-3 cities have relatively higher scale, market capitalisation, value-added, wages paid and output per plant vis-à-vis medium and large cities. Information on the skill composition of workers employed in manufacturing plants is not available (Tables 6.38 to 6.43). Net fixed capital per plant is Rs. 81 crore in Class-3 cities and Rs. 57 crore in others. Market capitalisation per plant is Rs. 466 crore in Class-3 cities and Rs. 381 crore in others. Value-added per plant is Rs. 50 crore in Class-3 cities and Rs. 38 crore in others. Employee cost per plant is Rs. 14 crore in Class-3 cities and Rs. 12 crore in others. Output per plant is Rs. 286 crore in Class-3 cities and Rs. 206 crore in others. Employment per plant is 2,058 in Class-3 cities and 1,243 in other cities. 13.Net forex earning is defined as the difference between gross earnings in forex minus gross expenses in forex. Gross forex earnings include exports; interest, dividend and other earnings. Gross forex expenses include imports of intermediate as well as capital goods; royalty and technical fees paid; foreign travel; interest, and dividend and other expenses. 66
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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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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 60 and 61: SPECIAL ECONOMIC ZONES (SEZS) AND F
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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 92 and 93: Chapter 7: Primary Survey: Analysis
Page 94 and 95: the North and South zones, whereas
Page 96 and 97: PRIMARY SURVEY: ANALYSIS AND RESULT
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Page 100 and 101: Table 7.2b Zone-wise Distribution o
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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 118 and 119: FDI DATA REPORTING AND CLASSIFICATI
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Page 122 and 123: Table 8.5 DIPP Classification of FD
Page 124 and 125: SECTOR-WISE CODE 3700 DEFENCE INDUS
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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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