FDI in India: Understanding the Implications for Growth and Job Creation

Backed by progressive economic reforms, India has been performing very well in terms of FDI inflows. However, FDI inflow in India is extremely skewed across the major sectors of the economy with the services sector accounting for more than half of the total FDI equity inflows. Having emerged as an attractive destination for FÈI, the services sector contributes more than half of India's GVA but its contribution to job creation although significant has been less than proportionate to its contribution to GVA and also lacks in quality. The manufacturing sector on the other hand has not been able to generate employment adequately owing to the capital-intensive mode of production that has been adopted in this sector. This paper while trying to counter the prevalent view that FDI inflow in India has failed to generate employment, also highlights some of the pressing issues that need to be addressed towards harnessing the employment-generating potential of the economy.