What Attracts FDI in Indian Manufacturing Industries?

Rashmi Rastogi () and Aparna Sawhney
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Rashmi Rastogi: Centre for International Trade and Development,Jawaharlal Nehru University

Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers from Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India

Abstract: In this paper we examine the pattern of inward FDI at the disaggregated industry level (NIC 3- digit), and test for the industry-specific characteristics that have been significant in attracting foreign investment in India during 2000-10. Since highly polluting industries (based on Central Pollution Control Board classification) have accounted for a substantive share of the FDI inflows, we control for these industries to discern the differential impact of industry characteristics in the dirty manufacturing sector. Our analysis of the FDI inflows focuses on a panel of top ten investing countries, as well as individual countries with relatively stringent environmental norms. Our results indicate that, on the whole (as well as from Japan), FDI inflows are significant in capital-intensive industries with high growth rate. In case of the US, the foremost industrialized country investing in India, the composition of FDI has shifted significantly towards less energy-intensive industries and labor-intensive non-polluting industries, while inflows within polluting industries have been towards the capital intensive industries with large market size.

Pages: 24 pages
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Citations: View citations in EconPapers (2)

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Working Paper: What Attracts FDI in Indian Manufacturing Industries? (2014)
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