India`s recent inwards foreign direct investment

The Institute for Studies in Industrial Development (ISID) has been supporting a T research programme on foreign direct investment (FDI), the origins of which can be traced back to the late 1970s. The studies under the programme examined the FDI inflows in the early years of liberalisation and suggested the need to critically examine the operational dimensions of FDI that are conceptually associated with advanced technologies, marketing expertise, modern managerial techniques, export possibilities, etc. An earlier study examined FDI inflows during 2004-14 and concluded that inflows potentiality having the above mentioned attributes form just about half of the reported inflows. The remaining inflows were on account of the involvement by financial investors and India-related investors. The study, sponsored by the Indian Council of Social Science Research (ICSSR), also analysed the 'Mauritius phenomenon' and provided estimates of the shares of different 'ultimate home countries of foreign direct investors in India. It also identified some little highlighted operational aspects of FDI companies. The case studies dealing with the evolution of FDI policy towards multi-brand retail trade and the defence industries reflected upon the process of FDI policymaking in India.

The present study updates the earlier one by providing recent evidence on the nature and sectoral involvement of FDI in India from the point of the nature of investors and their sectoral preferences. A critical issue alluded to in this study is that the government and its agencies have paid less than adequate attention to ensure that reporting of FDI is done in a manner that facilitates proper analysis of inflows and operations of FDI companies. This is in spite of the fact that a vast amount of literature underscores that benefits from FDI do not flow automatically to host countries. A strand of this thinking appears in the Discussion Paper on "Industrial Policy 2017" circulated by the Department of Industrial Policy and Promotion (DIPP). The Discussion Paper expressed dissatisfaction about FDI not delivering the expected benefits and further underlined the need to review the FDI policy. This was probably inevitable as over the years FDI is increasingly being seen to alleviate the current account deficit, and correspondingly its role as the provider of development finance and technology has diminished. Thus conceived, not all the FDI would be associated with technology infusion, let alone infusion of advanced technology. Further, for decades, many questions relating to FDI and MNCs have been answered in the Parliament, but the answers have often lacked the desired clarity. Given the absence of quality datasets for analysing the behaviour of FDI, there is little evidence that FDI policy changes have been 'evidence-based',