FLOW OF FOREIGN DIRECT

INVESTMENT IN INDIA: A STUDY OF

GROWTH & TREND

ABSTRACT OF THE THESIS SUBMITTED TO THE

UNIVERSITY OF KALYANI FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY IN COMMERCE

Under the supervision of

Dr. Subhas Chandra Sarkar

Professor of Commerce, University of Kalyani

Nadia, West Bengal

Submitted by
ASIT GOPE
Research Scholar
Department of Commerce
University of Kalyani
 ABSTRACT

1.1 Introduction
The process of opening of economy in India was started in 1990s with the
introduction of new economic policy in order to undertake the packages of economic
reforms. In a developing country like India, there is a huge requirement of such
capital for making steady economic progress. In India, Foreign Direct Investment
(FDI) may be considered as the blessing for any industrial concern since the capital
that flows under FDI scheme holds the long-term relationship with that concern in
future.

The definition as suggested by the International Monetary Fund (IMF), FDI means, an
investment made by foreign national of 10% or more in the capital or acquiring 10%
or more of the voting power of a host country’s enterprise. The intention to include
such 10% threshold limit by the IMF was to differentiate between the portfolio
investment and direct investment. Since both the terms FDI (Foreign Direct
Investment) and FPI (Foreign Portfolio Investment) are frequently confused, it was
necessary to make a line between the two as an international benchmark and therefore
IMF suggested that any investment less than the 10% ownership would be termed as
FPI. In case of FDI, the investor is committed to a long term relationship with the
enterprise as well as it is about the ownership and control.

In India it is also conceptually an accepted fact that the difference between the FDI
and FPI is to be based on the lasting interest as described in the international best
practices. India emphasised in attracting foreign investments mainly by two different
routes viz. Foreign Direct Investments (FDI) route and Foreign Institutional Investors
(FIIs) route. The investment policy of India suggests that an FII can invest in an
Indian company subject to maximum of 24% of the issued share capital of such
company whether or not invested under FDI scheme/policy or under portfolio
investment scheme.

Department of Industrial Policy and Promotion (DIPP), has made it clear that even if
FIIs are coming through the FDI route they cannot take more than 10% stake in the
company and even if the investment is categorised as FDI and also that investment
should not be more than 24% of the total equity.
India adopted FDI data reporting standard in alignment with that of international best
practices and accordingly the following elements of capital flows were included in the
revised FDI data:

i. Equity flows (equity in branches, shares in subsidiaries and other capital

contributions),
1
 ii. Reinvested earnings (retained earnings of foreign subsidiaries and affiliates),
and
iii. Inter-company debt transactions (inter-corporate debt transactions between
corporate entities).

1.2 Review of Literature:

Extensive studies had been made on FDI inflows in developing countries and its
impact on the growth, and also compared FDI inflows in India and China. However,
most of the literature focused mainly on various aspects. They are for example, (i)
FDI in India vis-à-vis FDI policy liberalization and (ii) FDI in India as compared to
China. (iii) Trend and direction of FDI flow in India.

Yukio Ito and Yuko Kinoshita (2004), in the IMF Working Paper “FDI spillovers in
China and India”, examined the differences in FDI spillovers using industry-level data
and macro analysis in specific reference to country and industry in both China and
India and they found that, in India, FDI related imports greatly impact the labour
productivity whereas export-oriented industries in both the countries are more
influenced by import rather than foreign capital.

Bajpai & Dasgupta (2004), in the working paper series “What Constitute Foreign
Direct Investment in India? Comparison of India and China”, focused on the issues
relating to the prevailing state of alignment of the definition of FDI in different
countries with the international standard. They also reviewed the existing accounting
gap in FDI statistics between China and India. Nagaraj (2003), in the special article
titled “Foreign Direct Investment in India in the 1990’s Trends and Issues” raised
some issues on the effects of the recent investments on the domestic economy. The
study focused on the issues such as trend of FDI flow in different regions, country
specific FDI source as well as different sectoral concentration of FDI in India. The
study also pointed out the issue of “round tripping” as rigorously practiced by China.
Jha (2003), in the Australian National University working paper titled “Recent Trends
in FDI Flows and Prospects for India” emphasised that the quality of FDI is the more
important factor which will count for the steady progress of the economy rather than
just quantity. There are, however, other literatures in respect of the FDI and its related
aspects in context of India and global arena which have been discussed in the first
chapter of the thesis.

1.3 Research Gap

A lot of researchers have studied FDI trend in India and also made comparative
analysis of FDI trend in China and India. However, few studies have been made to
compare the FDI inflow trend in ASEAN countries with that of India and China.
Various researchers have developed model that described the determinants of FDI
2
inflow in the country. The present study is a unique attempt which would throw new
light in the matter of how the GDP of the countries is influenced by FDI inflows and
FDI stock of the respective countries significantly. Nevertheless, the study also
provides useful understanding about the FDI entry routes in India showing
specifically whether there exist any route specific differences or not.

1.4 Objectives of the Study

The objectives of the study are summerised as follows:

(1) To study the Evolution of FDI policy of India.

(2) To study the Flow of FDI in different sectors and regions in India.

(3) To examine the Trend of FDI in India, China and Southeast Asian countries.

(4) To observe the General Trend of flow of FDI in India.

(5) To identify the FDI opportunities in India.

1.5 Methodology
The methodology has been described under the following heads:

1.5.1 Nature and the Source of the Data

The study has been made by analysing secondary data and information collected from
various Press Releases, Reports/Publications issued by several international bodies
such as United Nations Conference on Trade and Development (UNCTAD),
International Monetary Fund (IMF), World Bank, Asian Development Bank and as
well as from various national authorities such as Planning Commission (Govt. of
India), Ministry of Finance (Govt. of India), Ministry of Commerce & Industry
(Govt. of India), Reserve Bank of India (RBI) , FDI data issued by Secretariat for
Industrial Assistance (SIA), FDI data issued by Department of Industrial Policy and
Promotion and other Government agencies.

1.5.2 Design of the Sample

The study encompasses the area of both national and international in relation to
foreign direct investment attributes. The top ten sectors attracting the highest amount
of FDI in India had been chosen to study the trend of FDI inflows in India in different
sectors. So far as the analysis of the regional trend is concerned, the top five regions,
as described by the Reserve Bank of India as RBI Regional Offices, attracting the
highest amount of FDI in India had been selected in the study. To examine the Trend
of FDI in India, China and Southeast Asian countries, total six countries had been
selected including India and China. Out of the six countries four countries have been
3
selected from the member of The Association of South East Asian Nations (ASEAN)
namely Indonesia, Malaysia, Singapore and Thailand.

1.5.3 Period of the Study

The period of study is from 2005 to 2012, i.e. 8 years due to almost all the sectors
were permitted to up to 100 % FDI since 2005, when Special Economic Zones Act,
2005 was enacted which has been one of a major factor of attraction for FDI. Prior to
2005 Chinese FDI data only contained FDI in non-financial sectors. For the first time
in 2005 China had published its both financial and non-financial FDI data which have
been useful for making comparison. However, data pertaining to all the countries
under the study were not available after 2012 for making worthwhile comparison
between the countries.

1.6 Plan of Work

The Proposed study contains eight chapters which are listed below:

CHAPTER-1 : INTRODUCTION
CHAPTER-2 : EVOLUTION OF FDI POLICY OF INDIA
CHAPTER-3 : FLOW OF FDI IN DIFFERENT SECTORS
AND REGIONS IN INDIA
CHAPTER-4 : A COMPARATIVE FDI TREND ANALYSIS
AMONG COUNTRIES
CHAPTER-5 : GENERAL TREND OF FLOW OF FDI IN INDIA
CHAPTER-6 : FDI OPPORTUNITIES IN INDIA
CHAPTER-7 : FINDINGS OF THE STUDY
CHAPTER-8 : SUGGESTIONS AND RECOMMENDATIONS

2. Findings
2.1 Chapter-1: Introduction

The chapter deals with the introduction about the flow of Foreign Direct Investment in India,
its various aspects and also lays down the definition of FDI and its related aspects.

2.2 Chapter-2: Evolution of FDI Policy of India

This chapter focuses on the development of FDI policy vis-à-vis liberalisation
throughout the periods starting from 1948(i.e. after the independence) to 21st century.

4
The study period has been segmented into two parts, viz., (i) FDI Policy
Developments in Pre-liberalisation Period (1948-90) and (ii) FDI Policy
Developments in Post-liberalisation Period (from 1991 onwards). The major findings
of the study are enumerated as follows:

1. The Industrial Policy Resolutions of 1948 and 1956 Government of India

showed the aspirations to become self-sufficient in industrial production that
demanded huge amount of investment which in turn cleared the path for
foreign capital.

2. In order to encourage the domestic entrepreneurship and local manufacturers,

Government of India adopted a restricted FDI policy in late 1960’s. Foreign
Investment Board (FIB) was set up to deal with the cases involved in direct
investment and technical collaborations. However, FIB could not deal with the
cases where the total investment in share capital exceeded ₹20 million and
wherein the proportion of foreign equity exceeded 40%.

3. Due to stringent approach adopted by the Government of India to restrict

foreign equity by imposing the regulations of FERA 1973, India became
incapable of increasing exports particularly in manufacturing sectors in
seventies.

4. FDI policy was more liberalised in 1991 and it was continued to 2000 and
onwards. The new policy provides for automatic approval of FDI up to 51% of
equity in a specified list of 34 priority sectors. Until December 1996 only 34
industries as mentioned in the Annexure III of the New Industrial Policy
Statement of July 1991, were eligible for automatic approval of FDI up to 51%
of total equity.

5. FERA 1973 (Foreign Exchange Regulation Act, 1973) was replaced by FEMA
1999 (Foreign Exchange Management Act, 1999) with an intent to facilitate
external trade and payments and to promote orderly development and
maintenance of foreign exchange market.

6. Prior to 2000 a lot of sectors were opened up for foreign equity in India. In
2000, except for a few, all other activities were placed under automatic route
of FDI. The FDI regime has been progressively liberalised particularly after
2000 along with the simplification of the procedures of foreign investments.

7. In 2009, FDI policy as amended by the Government of India with the

announcement of Press Note 2, 2009 where the terms such as “Ownership”
and “Control” were separately defined and provided the guidelines to calculate
the extent of Total FDI in Indian company.
5
2.3 Chapter-3: Flow of FDI in Different Sectors and Regions in India

1. FDI equity inflows in different sectors located in different regions in India have
been observed. The top ten sectors attracted more than 69% (69.29%) of the
total FDI inflows in India up to December 2012. In India, the major sectors
attracted foreign direct investments so far, are, Services (both non-financial and
financial), Construction Development, Telecommunication, Computer
Software & Hardware, Drugs and Pharmaceuticals and so on.

2. Service sectors ranked the top position among all other sectors in attracting FDI
inflows in India. This sector has attained a cumulative share of 19.35% of the
total FDI inflow in India up to December 2012. The other sectors among the
top ten sectors attracting FDI inflows were Construction Development
(11.58%), Telecommunication (6.70%), Computer Software & Hardware
(6.18%), Drugs and Pharmaceuticals (5.21%), Chemicals (other than fertilisers)
(4.65%), Power (4.17%), Automobile (4.09%), Metallurgical (3.90%) and
Hotel and Tourism (3.46%).

3. Sustainable growth can be expected for the sectors having higher slope of the
trend line. The higher slope of the trend line has been found for sectors such as
Services, Hotel & Tourism, Construction Development and Chemical. All the
top ten sectors, except Computer Software & Hardware, have shown the
upward trend of FDI inflow. The slope of the trend line of Computer Software
& Hardware has been found negative. Even though the sector Computer
Software & Hardware had shown a downward trend, it still holds the fourth
rank in respect of the share in the total cumulative FDI inflows up to December
2012. The slope of the trend line has been found very low and flat for the
Telecommunication sector. Slope of the trend line has been found medium for
sectors such as Automobile, Power, Metallurgical and Drugs &
Pharmaceuticals

4. In order to test the significance between the differences of the actual and trend
values of FDI inflow, Chi-square (χ2) test has been applied for all the sectors
under the study and difference between the actual values and trend values of
FDI inflow has been found to be statistically significant for all the sectors .

5. All the top five RBI’s Regional Offices attracted more than 67% share of the
total FDI inflows in India up to December 2012. It was found that 32.62%
share of the total FDI inflows have been concentrated in the RBI’s Regional
Office of Mumbai and occupied the 1st place among the top five regions of
FDI recipient in India. The other regions among the top five regions attracting
FDI inflows were RBI’s Regional Office of New Delhi (19.17%), RBI’s

6
 Regional Office of Bangalore (5.59%), RBI’s Regional Office of Chennai
(5.34%) and RBI’s Regional Office of Ahmedabad (4.57%).

6. The higher slope of the trend line has been found for the RBI’s Regional
Office of Mumbai and RBI’s Regional Office of New Delhi. FDI inflows are
expected to be high in these regions. RBI’s Regional Office of Chennai (4th) is
ranked after the RBI’s Regional Office of Bangalore (3rd), though the slope of
the trend line for the region of Chennai has been found to be higher than the
region of Bangalore. FDI inflow in the Chennai region is expected to be higher
than the region of Bangalore. The lowest slope of the trend line has been
found for the RBI’s Regional Office of Ahmedabad.

7. In order to test the significance between the differences of the actual and trend
values of FDI inflow in different regions, Chi-square (χ2) test has been applied
for all the regions under the study and difference between the actual values
and trend values of FDI inflow has been found to be statistically significant for
all the regions.

2.4 Chapter -4: A Comparative FDI Trend Analysis Among

Countries
1. Among the countries under comparison China was the largest recipient of FDI
from 2005 to 2012. China has the highest average GDP (US$ billion) as
compared to the other countries under comparison from 2005 to 2012.

2. Growth of FDI inflows in India and China were in negative figure in 2009
depicting the effect of global downturn. However, where at global platform
the growth rate of FDI inflows was -32.82% in 2009, in India and China, the
growth rate of FDI inflows were -24.36% and -12.29% respectively.

3. Despite having economic advantage of low cost of labour and huge

potentiality, the South-East Asian region is way behind from the developed
nation of the world in respect of progress of FDI inflows. ASEAN countries
and including India and China have made a lot of international investment
agreements within the region and with countries across the globe and have
taken various investment related measures in order to attract FDI in the
economy. China and India have been the leading rank holders in making
Double Taxation as well as Bilateral Investment Treaties among the countries
under the study.
4. It has been found that China and Thailand are having relatively lower C.V.
(Coefficient of Variation) of FDI flows than the other countries under the
study. The C.V. of FDI flows in India has been arrived at 42.45% which

7
 implies that FDI inflow in India is not stable and it is up to 42.45% volatile in
nature. China has stable FDI flows over the years as compared to the other
selected countries under the study. The C.V. of FDI flows for China has been
observed 21.26% which is the lowest among the countries under the
comparison, followed by Thailand (32.58%), India (42.45%) Malaysia
(46.85%) Singapore (47.89%) and Indonesia (54.43%).

5. It has been observed that FDI Flows is expected to make higher impact on the
GDP in the positive direction. FDI Stock is, however, expected to make a
negative impact on the GDP. Therefore, continuous flow of FDI is much
needed to sustain and improve the GDP in the countries under the study.

6. It has been observed that there exist variations in the reporting of FDI data
among countries. For instance, India prefers to include foreign participation in
equity capital, reinvested earnings and other direct capital flows. China, on the
other hand, has a wide range of activities in FDI reporting data and thus it
adopted a broader outlook. In case of China, a huge amount of money has
been made a round trip and sent to outside of the country and then when these
are send back to China they were treated as FDI. Therefore, it is not the
foreign money which they receive and included in the FDI reporting rather
these are their own money made a round trip. The results of the statistical test
would have been different if FDI data reporting format were equal among all
the countries under the study. Henceforth, uniformity in the FDI data reporting
format is solicited.

2.5 Chapter-5: General Trend of Flow of FDI in India

1. In spite of the Governmental support as 100% Foreign Equity has been
allowed to almost all the manufacturing sectors, the sector did not receive the
higher amount of FDI after 2006. Due to robust growth of the Non-
manufacturing Sector, specially Services Sector, where most of the FDI were
concentrated, the manufacturing sector lost its share of FDI in India.

2. The major portion of FDI flows came from Mauritius, Singapore, U.K., Japan,
U.S.A. etc. It was observed that Mauritius alone has been the largest
contributor of FDI in India up to December 2012 holding a share of 38.10% in
the total FDI flow in India, followed by Singapore (9.97%), U.K. (9.07%),
Japan (7.44%), U.S.A. (5.90%), Netherlands (4.49%), Cyprus (3.61%),
Germany (2.72%), France (1.81%) and U.A.E. (1.25%).

3. It has been found there is a considerable possibility of the involvement of

black money that has been invested through the Mauritius route in the form of

8
 FDI since the Indian Government simply accepts the Certificate of Residence
as issued by the Mauritius Government of any person or entity. Therefore,
Indian Government never inspects in to the financial source and true
residential status of those persons or entities who or which have invested in
India through the parent company set up in Mauritius and obtained the
certificate of residence from the Mauritian authority.

4. Analysis of the routes of FDI entry revealed a dramatic change in the

composition of FDI inflows in India after 2005. It was found that the route of
Foreign Investment Promotion Board (FIPB)/Secretariat of Industrial
Assistance (SIA) and the Acquisition of Shares had been less significant
routes after 2005 since automatic route under RBI had been contributing the
major portion of FDI flows in India. It was found that there exist significant
differences between the routes of the FDI inflows. Therefore, route specific
differences of FDI flow exist in Indian FDI environment.

5. To test the acknowledgements of the importance of the different routes of FDI

inflows we have used the Chi-square technique for the hypothesis testing. The
calculated value of χ2 has been found to be more than the tabulated value
followed by the accepting the alternative hypothesis and rejecting the null.
Therefore, the test found the existence of significant differences between the
routes of the FDI inflows. Therefore, route specific differences of FDI flow
exist in Indian FDI environment.

6. In order to find out the trend pattern of FDI flows we have used the Linear
Trend Equation of Ordinary Least Square method. The slope of the trend line
is positive (157.993) and the trend values are increasing yearly by ₹157.993
billion. The difference between the actual values and trend values of FDI
inflow has been tested with the help of Chi-square technique and it was found
to be statistically significant.

2.6 Chapter-6: FDI Opportunities in India

1. It has been found that India’s FDI inward potential index ranking, as published
by the UNCTAD, has been improving moderately over the years and its FDI
inward performance index has showed mix improvements. However, the
potential index, published by UNCTAD, is based on 12 economic and
structural variables and it does not include the market size of the country. In
case of the element of the domestic market size, India can surpass its
competitive countries.

2. It has been observed that the GDP of India is highly correlated with the
Services sector compared to the Manufacturing sectors. The correlation

9
 between the growth rate of GDP and Services sector has been found to be 0.89
and the correlation is statistically significant. The correlation between the
growth rate of GDP and Manufacturing sectors has been found to be 0.55 and
the correlation is not statistically significant. Therefore, it indicates that in
India Services sector has the higher potentiality as against the manufacturing
sectors to contribute to accelerate the GDP growth.

3. It has been observed that the list of the states having the approval of Special
Economic Zone is populated by the states such as Andhra Pradesh,
Maharashtra, Tamil Nadu, and Karnataka. Since the industrial development
schemes are mostly promoted in these states, they have huge potentiality for
foreign investments. It has also been observed that Information Technology
and its related industries (belongs to Services sector), mostly concentrated in
these states, have attracted the highest portion of FDI in India.

4. Since India has to compete with its near neighbor nations for attracting FDI
inflows, the corporate tax bracket has also been a factor for FDI. However, it
has been observed that in case of India, the Corporate Income tax rates on
foreign companies as well as the rate of tax on Capital Gains are much higher
than the other competing Asian countries. Failure to Implement the Direct Tax
Code by the Government of India might contribute to the loss of economic
advantage that could have been achieved instead, if implemented properly in
due time.

3. Suggestions and Recommendations

We give our suggestions and recommendations divided into three groups such as
Structural, General and Specific—all aimed at improving the efficacy of FDI
environment in the sub-sections that follow.

3.1 Suggestions for Structural Changes

Suggestions under this category are presented as follows:

1. The long overdue of the opening of the sectors for manufacturing units to
foreign investors had been received when FDI in most of the manufacturing
units were permitted up to 100% under the automatic route from 2005 and
onwards. However, FDI flows in non-manufacturing sectors are still greater
than the manufacturing sectors in India. The Government of India must ensure
proper infrastructural facility, specially implementing a single policy for the
acquisition of land in all over the India and also provide single window of
operation for setting up manufacturing units.

10
 2. In India the Rate of Corporate Tax charged to foreign companies are the
highest among the countries under the study. India proposed to implement the
Direct Tax Code, 2010 with a new tax regime such as, after implementation
foreign companies will be taxed at rate of 30% and also other benefits will be
made available to the foreign investors in the form of capital gains. However,
this has not been made possible. The Government of India must consider this
matter very seriously keeping in view of the economic advantages that have
been the primary attraction for FDI and come up with a new tax mechanism
that offers benefits to foreign investors.

3. The close nexus between the Double Taxation Treaties and FDI is a
phenomenon. From India’s point of view, DTT with Mauritius where the tax
on capital gain to be paid by the resident of Mauritius in that country only as
well as the possible involvement of black money have been the major cause
for huge inflow of FDI into India. DTT with Mauritius has really helped India
to increase its position in FDI inflows. However, India has also made
comprehensive agreements as DTTs with other countries also but the amounts
of FDI flows came from those countries are way behind as compared to
amounts of FDI came from Mauritius. However, India gave away much tax
exemption in order to gain into FDI flows from Mauritius. Many foreign
companies as well as Indian companies have set up subsidiary companies in
Mauritius in order to claim the tax advantage. Circular 789 of 2000 as issued
by the CBDT of India must either be withdrawn or amended to nullify the
effect of ‘Indo-Mauritius Tax Heaven’ status so that FDI will directly flow to
India and not through the Mauritius route.

3.2 General Suggestions

Suggestions under this head are outlined as below:
1. The analysis of regional FDI distribution showed uneven scenario in India.
Therefore, the benefit of the aid of foreign capital has not been enjoyed by all
the industries located in the different parts of the economy to a large extent.
Therefore, all the other regions should be provided with the proper incentives
as well as infrastructure in order to make them more appealing to the foreign
investors.
2. It is recommended that the Government of India must encourage the foreign
investors to make investments in services sector since this sector has the
greater impact on GDP rather than the manufacturing sectors. However,
Government of India also encouraged the manufacturing sectors by
introducing Industrial Park scheme or by setting up SEZs where lots of tax
benefits are provided to those concerns set up under such scheme or in zones.
However, southern and western parts of India are mostly benefited in getting
the SEZs or Industrial Parks. Therefore, it is recommended that in order to
11
 sustain overall growth of GDP these schemes or plans must be made available
and get implemented in other parts of India also.

3. Since FDI Flow is expected to make higher impact on the GDP in the positive
direction and FDI Stock to make negative impact on the GDP, it is imperative
to have continuous FDI Flow in order to make positive growth in GDP. Mere
increase in the FDI Stock can not increase the GDP of the country.
Liberalisation of the polices in respect of FDI is sought to be more and more
utilised in all the countries under the study for ensuring the continuous flow of
FDI.

4. Coefficient of Variation (C.V.) shows the degree of consistency of FDI

inflows over the years. FDI inflows in India are not consistent as compared to
China and it is volatile at almost 42.45%. Therefore, Government must
stimulate the factors by making economic reforms that can stable the inflows
and the economical activities do not get hampered.

3.3 Specific Suggestions

1. India needs to improve the land information system so that geotechnical maps
and all information related to such land can be made publicly accessible. It is
also recommended to improve India’s financial services and most importantly
the labour market and more precisely the labor-employer relations.
Transparency from the policy makers must also needed to be reviewed. The
problem in India is that it has low rankings in both the labour-employer
relation as well as production process sophistication. In India, these two
factors are contrary to each other. If production process is sophisticated the
labour-employer relation is adversely affected since production process
sophistication may lead to labour termination or lay-off. Therefore, the labour
laws of India must be reviewed keeping in mind both of these two indicators.

2. The study found that there are differences in FDI reporting format among
countries under the comparison. In case of China, they include round tripping
domestic money reinvested in the country as FDI. They also include wide
range of activities in FDI reporting data. On the other hand, India did not
provide comparable FDI data in its reporting format. Therefore it is
recommended to adopt uniform FDI data reporting format as per the
international standard.

3. Since RBI’s automatic route has been contributing the most of the FDI flows
in India and there exists route specific differences of FDI flows, more sectors
which are under FIPB/SIA, must be placed under the RBI’s Automatic route.
12
 Since automatic route does not require the investors to fall into the hands of
procedural bottlenecks, foreign investors will be encouraged to take such
benefit.

4. Limitations of the study

The study is not free from some limitations. The limitations are furnished below:

The study has analysed FDI inflows directed to the top ten sectors and top five
RBI’s Regional Offices of India. There are, however, sectors and regions
where the flow of FDI has important impact, have not been taken into
consideration for the analysis.

The study showed how the FDI Flow and FDI Stock make impact on the GDP
of the countries under the comparison. There are, however, other macro-
economical factors (i.e. foreign exchange, outward FDI, balance of payment,
inflation, etc.) that might influence the GDP positively or negatively which
have not been accounted for in the study.

Due to differences that exist in the FDI data reporting format adopted by the
countries under comparison, there is a possibility that the results of the test
might have been different if the data reporting format were equal.

Since the data pertaining to the growth rate of GDP and growth rate of
Manufacturing and Services sector in Chapter – 6 were not available,
hypotheses were tested taking the period up to 2007-08.

13
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 4. Jha, R. (2003), "Recent Trends in FDI Flows and Prospects for India",
Australian National University Working Paper.

5. Nagaraj, R. (2003). "Foreign Direct Investment in India in the 1990's Trends

and Issues", Economic and Political Weekly April 26, 2003.

Official Reports

1. ASEAN Investment Report. (2009). Executive Summary, "Sustained FDI

Flows Dependent on Global Economic Recovery" ASEAN.

2. ASEAN Publication "Investment", ASEAN.

3. ASEAN Publication, ASEAN Investment Map. ASEAN.

4. Department of Industrial Policy and Promotion. (DIPP). (1998). Various Press

Notes. Ministry of Commerce & Industry. Government of India.

5. Ernst and Young. (2011). World-wide Corporate Tax Guide, 2011. U.K.

6. International Monetary Fund (IMF). (1993). Balance of Payment Manual,

1993.

7. International Monetary Fund (IMF). (2013). World Economic Outlook

Database, October 2013.

8. SIA Newsletter (2009). Department of Industrial Policy and Promotion,

Annual Issue 2009.

9. SIA Newsletter (2012). Department of Industrial Policy and Promotion,

Annual Issue 2012.

10. UNCTAD. (2006) World Investment Report, 2006. UNCTAD.

11. UNCTAD. (2008). "World Investment Prospects Survey 2008-2010".

UNCTAD.

12. UNCTAD. (2010). World Investment Report, 2010. UNCTAD.

Database:
1. UNCTAD
2. UNCTAD STATISTICAL DATA BASE

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