There are two key data sources on FDI: UNCTAD, World Bank and the CIA Factbook (see Wikipedia). It appears that Wikipedia data are cumulative, not annual.
I have used detailed data from the World Bank to knock up the following cumulative chart of FDI:
Things have barely improved since 2005:
We see that Hong Kong receives anywhere from three to four times the FDI that India receives, and that China continues to receive around 8 times what India receives.
BOGUS CLAIMS THAT INDIA GETS MORE FDI THAN CHINA!
Data for 2014 is difficult to attribute to Modi. However, data for 2015 may indicate the results of Modi’s policies. A bogus report came out earlier this year, stating: “India pips China as top FDI destination in 2015: Report”
I’m reproducing the chart below:
Why is this bogus?
It is entirely inconsistent with past China performance. There is no reason for FDI to drop from around $289 billion in 2014 to only $56 billion in 2015 in China.
Once World Bank data are produced, we’ll know the truth.
It is crucial to remember that much of MOST FDI committed to India never eventuates, as companies find the going very tough and renege. Further, investments that cross a financial year are counted in the actual year of investment. Annouceables could take many years to materialise.
Actual FDI flows are the only ones that count. We must wait for 2015 data from the World Bank to comment about any improvement in India’s FDI performance in the Modi regime.
We could – once real data emerge – potentially give Modi government some credit for trying to raise the level of FDI in India, but the cumulative position is clear: India has a VERY long way to go in order to achieve the levels of FDI that China has achieved.
FDI was pivotal to China’s growth. India simply doesn’t have the conditions necessary to achieve such levels of FDI.
SBP raised this issue here: Mr Modi should first make India makeable, says SBP President, Vishal Singh
Akshay Shah kept pursuing the data source, etc. (see this) and I was able to locate this report in Economic times as the cause of the confusion: http://economictimes.indiatimes.com/news/economy/finance/india-replaces-china-as-top-fdi-destination-in-2015-report/articleshow/51932057.cms
The report is by fDi Intelligence, a division of The Financial Times Ltd.
I’ve downloaded the report – attached. The last page talks about the data and states that this is ONLY new projects.
It doesn’t include include mergers and acquisitions or other equity-based or non-equity investments. Only new investment projects and significant expansions of existing projects are included.
The data presented includes FDI projects that have either been announced or opened by a company. The data on capital investment and job creation is based on the investment the company is making at the time of the project announcement or opening. As companies can raise capital locally, phase their investment over a period of time, and can channel their investment through different countries for tax efficiency, the data used in this report is different to the official data on FDI flows.
This data is therefore telling us something useful (being a lead indicator) – but not at all the full story. The full story is in the World Bank report which compiles actual flows of money in a given year. That clearly takes a lot of time to compile (around 2 years).
While this is good information, there is no substitute for the aggregate flow – which measures actual real money that is coming into a country. In that sense, China remains far ahead of India, although if this lead indicator is correct, India could catch up with China in a few years – particularly if Chinese economy continues to languish due to its own debt bubble.
So the underlying data was not bogus but the way it has been used is incorrect, bogus and highly political. It is grossly improper to not include a discussion of the issues I’ve clarified on this blog post.