Why has FDI into other sectors, especially services, grown dramatically faster than manufacturing?
Will this trend continue? Since the services sector in India is attractive, the growth in FDI is very dramatic. But manufacturing has a lot more constraints. Transforming capital into assets or output is more difficult in manufacturing than in services. Manufacturing is more impacted by constraints in infrastructure, policy delays due to red-tapism, etc than services. What are the policy restrictions affecting FDI inflow? Addressing infrastructure constraints at local levels are more important than macro-level policy issues. Issues like land acquisition, power and logistics can subtract 50% from profitability. These are the main challenges that will have to be addressed at local and the state government levels. If you want to get more FDI, especially into manufacturing, then focus on infrastructure development, talent pool and local policy. If you can’t solve all the issues in manufacturing, segment them either by…
