Over the past three decades, the Indian policy makers have been consistently emphasising the importance of attracting sizeable amounts of foreign direct investment (FDI). Governments, both at the Centre and in States, have been highlighting the rising levels of inflows and the FDI projects they have been able to attract. Given this central focus on FDI, it is reasonable to expect that the reported figures for FDI inflows would be a reliable barometer regarding the participation of foreign companies in India. However, the study India’s Recent Inward Foreign Direct Investment: An Assessment, published by the Institute for Studies in Industrial Development in July 2018, identifies many serious limitations of the data on FDI inflows.
The limitations make the data unsuitable for drawing straightforward conclusions, especially when commenting on the effectiveness of specific policies and programmes like Make in India (MII). Even the annual aggregate inflows cannot be relied upon to provide guidance regarding year-to-year changes because of omissions and commissions involving very large remittances. Nor do they truly reflect the extent of capacity creation in the economy by FDI. The distortions and limitations in official statistics show up prominently when the inflows are examined at the level of individual companies/industries.
The issues identified include (i) delayed reporting, (ii) duplicate reporting, (iii) non-reporting, (iv) incorrect entries, (v) notional inflows, (vi) inappropriate industrial classification, (vii) under representation of acquisitions, (viii) ‘round-tripping’ by large global corporations and (ix) limited disclosure/analysis of the information obtained from the investees. These findings are mainly based on comparison of remittance-wise details reported in the Department of Industrial Policy and Promotion’s (DIPP) SIA Newsletterwith investee companies’ filings with the Ministry of Corporate Affairs. The study describes each of the issues using multiple examples and case studies.