What Attracts FDI in Indian Manufacturing Industries?

This paper examines 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. The analysis of the FDI inflows focuses on a panel of top ten investing countries, as well as individual countries with relatively stringent environmental norms. The results indicate that, on the whole (as well as from Japan), FDI inflows are significant in capital-intensive industries with high growth rate.