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Chapter 7: Primary Survey: Analysis and Results 7.1 Backdrop Even though most of the objectives of the study were fulfilled using secondary data in Chapter 6, a primary survey of FDI-enabled enterprises was undertaken to gather relevant information across India. Separate survey questionnaires were prepared for manufacturing and service firms, 1 in order to capture all the relevant information pertaining to these sectors, and discussed with knowledgeable persons. Then, a survey was conducted to collect information from FDIenabled enterprises. To select samples for the primary survey, a list of FDI enterprises was compiled from company-level records provided by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India. These records contain information on FDI inflows, investing country, name of the company, NIC sector and item code. They are called company-specific records as these are entered as many times as a company receives foreign investment during a particular year. Company records were available for the period January 2000 to June 2007. They were supplied in html format, which were converted into Excel files for easy processing and tabulation. After conversion, individual records were edited for the name of the company and sectors. This exercise facilitated grouping of companies by year, routes and sector. After cleaning and editing, a total of 20,420 processed records were obtained. These are spread across 92 sectors as classified under the Industries (Development and Regulation) Act (IDR Act), 1951. However, for sampling purposes the individual records of a company were merged to form unique companies. Records with an FDI inflow above $10,000 (0.01 million) were considered to prepare a list of unique companies. With this cutoff, the number of records came down to 14,850. It was found that records with investment below $0.01 million had entries with zero amount of FDI; these records were grouped separately and samples of unique companies were obtained from them. This would help assess the reasons for the low level of investment. The list of unique companies was prepared such that if a particular company had received foreign investment more than once in a specific sector during January 2000 to June 2007 that particular company was made unique by that sector and its cumulative FDI was calculated accordingly. However, if the company had received foreign investment in different sectors, it was considered as a different company. Through this process, the records were merged into 9,056 unique companies that accounted for cumulative foreign direct investment of $38.12 billion. The list of unique companies was used to select samples for the primary survey. A sample of about 20 per cent was selected and a two-stage sampling technique was followed to select samples. First, a weighted stratified sampling technique was applied. Under this method, unique companies were divided into groups or strata, and samples were selected separately from each stratum. Here, sectors act as strata. Samples were selected from each stratum based on weights, where the weight was the average of the share of number of companies and share of FDI in each sector. This procedure is simple and takes into account both the number of companies and amount of FDI in each sector, but it resulted in over-sampling of companies in a few sectors, because these sectors comprised a small number of companies but accounted for relatively high amounts of FDI, that is, the FDI per company was high. To overcome this problem, the over-sampled companies were redistributed to other sectors such that it did not exceed the total number of 1. Copies of the questionnaires are provided at the end of the report. 73
FDI IN INDIA AND ITS GROWTH LINKAGES companies in that sector. By this method, the entire sample of 2,000 companies was allocated and then redistributed across sectors. This sample accounted for 39 per cent of total cumulative FDI. After the allocation of samples to the sectors, the next stage of sampling involved exact identification of companies through the simple random selection method. This was achieved by the use of SPSS software through which the allocated companies in each stratum were randomly selected without replacement. 2 This formed the total sample of companies to which questionnaires were to be sent. Efforts were made to compile company addresses since the DIPP records contained only the company names and not their addresses. Different sources, such as the Capitaline and Prowess databases and various websites, were used to locate these addresses. After compiling the addresses of both manufacturing and services firms, we posted the questionnaires to companies across India. About 1,500 questionnaires were despatched along with covering letters from DIPP and NCAER. After three months of waiting and a follow-up, we received very few responses, so the survey was conducted through personal interviews. 7.2 Difficulties in Conducting the Survey The first problem was collecting the addresses of the manufacturing and service firms, and several sources were used to locate them. Most of the information compiled from the Ministry of Corporate Affairs website and the internet was outdated as many companies had either shut down or relocated. We mainly relied on the information in the Capitaline database. Other difficulties were as follows: lack of responses from company representatives, including the top management; most respondents merely handed over annual reports of the company and were not willing to discuss the questionnaire; and those who did discuss the questionnaires could not answer many of the questions due to lack of information. Thus, the response rate to the questionnaires was low. We received more than 400 responses but selected only 284 due to data consistency. These included 129 manufacturing firms and 155 service firms. 7.3 Analysis All the completed questionnaires were entered in an Excel database and SPSS software was used to tabulate the aggregated results. All individual company data remain confidential. Of the 284 FDI-enabled firms, there are 129 manufacturing firms (25 are common with the secondary data base) and 155 service companies (9 are common with the secondary data base) (Table 7.1a). These companies are spread across four zones – East, North, South and West – and also large and small cities, where large cities comprise Class-1 and Class-2 cities combined, and small cities are Class-3 cities. The large cities are towns with a population of 5,00,000 and above, and Class-3 cities are towns with a population of less than 5,00,000. This bifurcation of large cities and small cities was made partially to address the question of where FDI goes within a particular zone. More specifically, the interest was in knowing whether FDI is concentrated in large cities, i.e., metros, or small cities/towns/rural areas. Of the 284 firms which could be surveyed, there is concentration of firms in the North and South zones followed by the West zone; there are few FDI-enabled firms in the East zone. The maximum number of surveyed manufacturing firms is in 2. The number of companies randomly selected from each stratum was different depending on their weightage. 74
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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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at about 2 per cent or less of the
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Table 2.5 Sector-wise Break-up of F
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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
Page 44 and 45: Chapter 3: Mergers & Acquisitions a
Page 46 and 47: Table 3.2 Short-term effects of FDI
Page 48 and 49: proportion of foreign investment in
Page 50 and 51: Chapter 4: Special Economic Zones (
Page 52 and 53: 4.4 Management of SEZs SEZs are und
Page 54 and 55: in the eight major SEZ’s exports
Page 56 and 57: Foreign Direct Investment in SEZs S
Page 58 and 59: In a span of a few years, there hav
Page 60 and 61: SPECIAL ECONOMIC ZONES (SEZS) AND F
Page 62 and 63: existing infrastructure, (b) exploi
Page 68 and 69: Chapter 5: FDI: Linkages with the E
Page 70 and 71: construction (4200); fuels, includi
Page 72 and 73: FDI: LINKAGES WITH THE ECONOMY S. N
Page 74: Table 5.5 Sector-wise FDI in India
Page 77 and 78: FDI IN INDIA AND ITS GROWTH LINKAGE
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
Page 100 and 101: Table 7.2b Zone-wise Distribution o
Page 102 and 103: Table 7.3b Zone-wise Distribution o
Page 104 and 105: Table 7.6a Number of Employees in S
Page 106 and 107: Table 7.7a Mode of Transport from F
Page 108 and 109: Table 7.8a Number of FDI-enabled Fi
Page 110 and 111: Chapter 8: FDI Data Reporting and C
Page 112 and 113: sector, non-profit institutions ser
Page 114 and 115: three categories, namely, (i) inves
Page 116 and 117: Table 8.1 Trends in FDI Inflows to
Page 118 and 119: FDI DATA REPORTING AND CLASSIFICATI
Page 120 and 121: Table 8.3 Trends in FDI Inflows by
Page 122 and 123: Table 8.5 DIPP Classification of FD
Page 124 and 125: SECTOR-WISE CODE 3700 DEFENCE INDUS
Page 126 and 127: FDI DATA REPORTING AND CLASSIFICATI
Page 128 and 129: 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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Questionnaires
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QUESTIONNAIRE 257
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