Japanese FDI in India perform better than US
Mumbai, Sep 10: Japanese firms are found to perform financially better than US firms on the front of FDI (foreign direct investment) in India, says an award winning study by Dr Rashmi Banga.
Reasoning it, the study says that Japanese affiliated firms are found to have lower scale of operation but higher output growth.
Moreover, Japanese firms have higher technology adoption when compared to the US firms. It is despite the fact that the US affiliated firms use more capital-intensive techniques and are more adjusted to the Indian financial environment, says the study.
A New Delhi based economist, Ms Banga is the winner of Exim Bank International Economic Development Research Annual (IEDRA) award for 2005, for her doctoral dissertation titled 'The nature, pattern and impact of Japanese and US FDI in Indian manufacturing'. The award was conferred on her recently in Mumbai by S T Devare, who is the visiting senior research fellow at Institute of Southeast Asian Studies, Singapore, in presence of the bank CMD, T C Venkat Subramanian. The period of her period of study is 1994-95 to 1999-2000.
The study has revealed many more facts that say how Japanese firms are better than US firms while putting their money in India.
Japanese firms have higher institutional shareholding and lower individual shareholding. More of the equity is tied to the fixed assets and the proportion of fixed assets to total asets is also higher. Moreover, Japanese firms are highly geared, though the debts are less risky. Loans from foreign sources are higher. While US firms, like Indian ones, are more equity oriented.
Referring to Kojima's view, the study says that Japanese type FDI is more export-oriented when compared to American-type FDI that is export-substituting in nature. Making policy suggestions on the topic the study talks for making FDI more inter-linked with domestic firms for greater export spillovers.
Finally making a cautionary note, the study says that before entering into bilateral negotiation, the impact of FDI from particular source must be analysed.