Even as Narendra Modi government attributes the increasing size of foreign direct investment (FDI) flow into the country to the success of its flagship "Make in India" programme, the interim conclusions of an on-going study by two Delhi-based researchers suggest that the link between the two may not be as strong as the government would want us to believe.
The researchers point out that the cumulative FDI inflows in the make in India (MII) thrust sectors had hardly increased during the current tenure of the government as compared to the last two years of the previous regime. In other words FDI inflow to MII thrust sectors, cumulatively, did not see any additional momentum as the government suggests after it unleashed a global campaign to promote Indian manufacturing after coming to power in mid-2014. While India attracted $ 62 billion as FDI into MII thrust sectors in 2012 and 2013, the inflow was $ 59.8 billion for the same segments during October 2014 to March 2017, the yet-to-be-published analysis notes.
Presenting their initial findings at a workshop organised by Institute for Studies in Industrial Development (ISID), in Delhi, researchers K S Chalapati Rao and Biswajit Dhar point out that even in the case of MII thrust industries in the manufacturing sector, the trend remained the same. While India attracted $ 28.1 billion in MII manufacturing industries between 2012 and 2013, the inflow was $ 19 billion during October 2014 - March 2017 period.
The government had on 27th December, 2017 highlighted changes in FDI inflow as one of the key achievements of the Make in India initiative. It had also pointed out multifold increase in FDI inflows in over half a dozen MII thrust areas after the launch of the initiative.
The MII initiative was launched on September 25, 2014 with the objective of facilitating investment, fostering innovation, building best in class manufacturing infrastructure, making it easy to do business and enhancing skill development. The government had also revealed action plans which included policy initiatives, fiscal incentives, infrastructure creation, and ease of doing business, innovation and R&D and skill development, to promote 21 key sectors.
According to the Commerce Ministry, FDI inflows showed significant jump in several sectors like aviation, mining, auto and auto components, electronics and IT, ports and shipping, media and entertainment and textiles under the current government.
While FDI grew six times - from $93 million (2011-14) to $519 million (2014-17) in aviation, it grew 5.9 times in mining sector- from $213 million (2011-14) to $1261 million (2014-17) and 1.7 times in automobile and auto components - from $3.98 billion (2011-14) to $6.86 billion (2014-17)
According to the government's analysis, FDI grew 4.4 times in electronics & IT sector- from $2.77 billion (2011-14) to $12.24 billion (2014-17), and 1.9 times in information & broadcasting - from $1.5 billion (2011-14) to $2.8 billion (2014-17).
In the case of ports and shipping, FDI grew 6.8 times from $0.22 billion (2011-14) to $1.5 billion (2014-17). In textiles and apparel, FDI grew 2.2 times - from $467 million (2011-14) to $1047 million (2014-17).
Considering a possible time lag between policy initiatives and FDI inflows, it may be premature to attribute India's growing stature as an FDI destination to MII initiative, but there cannot be any dispute over the fact that FDI inflow continues to grow in the country. The government has claimed that the FDI inflow of $160.79 billion between April 2014 and March 2017 represented 33 per cent of the cumulative FDI in India since April 2000. It also points out that in 2015-16, FDI inflow crossed the $ 50 billion mark in one fiscal year, for the first time ever. In 2016-17, FDI inflow stood at a record of USD 60 billion, highest ever recorded for a fiscal year ever.
The researchers acknowledge the fact that India's FDI inflows have seen growth in recent times. However, they caution that the government data in its current form may not be all that revealing as there are constraints in its collection, classification, which are being pointed out in the upcoming study.