FDI Accounting in India and China: A Need for Harmonization

The objective o f this pap er is to initiate discussions on
standardizing the m ethod fo r m easuring Foreign Direct
Investment (FDI) across countries. It is im portant to use
consistent m ethod so that there is a fa ith fu l representation
o f a country's investment clim ate an d the inform ation is
relevant fo r the purpose o f foreign investors. India an d
China measures Foreign Direct Investm ent (FDI) using
two different methods. India measures FDI on the basis o f
equity investments, whereas China includes certain items
which do not strictly fa ll under the purview o f FDI.
Inclusion o f items other than equity increases the reported
FDI in China. It is presum ed that overall higher reported
FDI m akes China a p p ear m ore attractive than India. Our
findings suggest that once adjustm ents fo r the definitions
are m ade, difference betw een the FDI in Ch ina an d India
decreases substantially.

References

Anonymous, 2006. FDI: The Betrayal, Business and Economy. 26 January 2006, pp. 78–81.
Bajpai, N; & Dasgupta, N. 2004. The Hindu Business Online. 15 May 2004
http://www.blonnet.com/2004/05/15/stories/2004051500081000.htm
Bajpai, N; & Dasgupta, N. 2004. What constitutes foreign direct investment? Comparison between India and China. CGSD Working Paper No.1, The Earth Institute at Columbia, pp. 25.
Bhattacharyya, B; & Palaha, S. 1996. Policy Impediments to Trade and FDI in India. Wheeler Publishing, New Delhi.
Ghosh, P. 2003. India Sees FDI Differently. Rediff India Abroad, 6 January 2003.
http://www.rediff.com/money/2003/jan/06fdi.htm
Huang, Y. 1998. FDI in China: an Asian perspective, Hong Kong: Chinese University Press; Singapore: Institute of Southeast Asian Studies.
Huang, Y. 2007. Assessing financing constraints for domestic private firms in India and China: evidence from the WBES survey. In Prime P.B; and Kulkarni K.G; (Ed), Economic development in India and China. Serials Publications, New Delhi.
The Hindu, June 30, 2003. India to Adopt Global Norms for Compiling FDI Inflows.
http://www.hinduonnet.com/businessline/2003/07/01/stories/2003070102330300.htm
IFC. 2002. International Finance Corporation, 2002 Annual Report.
http://www.ifc.org/AnnualReports/ar2002/
John, E. 2002, Round-tripping–FDI, The Financial Express, 5 June 2002.
Nagaraj, R. 2003. Foreign Direct Investment in India in the 1990s: Trends and Issues. Economic and Political Weekly, Vol. 38, No. 7, pp. 1701–1712.
Narasimhachary, S; & Gangadhar, V. 2006. Foreign Direct Investment: A Study of India and China. The Indian Journal of Commerce, 59(4), pp. 51–61.
Pfeffermann, G. 2002. Paradoxes: China vs. India. Paper presented at the Private Sector Development Forum 2002, April 23–24, World Bank, Washington, D.C.
Prime, P.B. 2007. Research on India and China: interconnections and comparisons. In Prime P.B; & Kulkarni K.G. (Ed), Economic development in India and China. Serials Publications, New Delhi.
Raj Kumar. 2004. FDI in India: Some Facts and Views. Banking Finance, pp. 5–9.
Sicular, T. 1998. Capital Flight and Foreign Investment: Two Tales from China and Russia. World Economy, vol. 21 no. 5, pp. 589–602.
Srivastava, S. 2003. What is the True Level of FDI Flows to India? Economic and Political Weekly, February 15.
United Nations Conference on Trade and Development. 2005. Prospects for Foreign Direct Investment and the Strategies of Transnational Corporations, 2005–2008. New York and Geneva: United Nations Publication, pp. 60.
Vidyasagar, N. 2005. FDI inflow numbers may spiral if accounting system is altered. The Times of India, 10 February 2005.
http://timesofindia.indiatimes.com/business/india-business/FDI-inflow-numbers-may-spiral-if-accounting-system-is-altered/articleshow/1017584.cms
Wei, S. 2000. Sizing up foreign direct investment in China and India, Centre for Research on Economic Development and Policy Reform Working Paper No. 85, Stanford University, December.
Xia, 2007. People's Republic of China’s round-tripping: scale, causes and implications, ADP Institute Discussion Paper No. 7, 2007.

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M. R. Shollapur, Suneel Maheshwari, UdayTate . (2009). FDI Accounting in India and China: A Need for Harmonization. DIAS Technology Review, 6(2), 1-14.

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[1] Anonymous, 2006. FDI: The Betrayal, Business and Economy. 26 January 2006, pp. 78–81.

[2] Bajpai, N; & Dasgupta, N. 2004. The Hindu Business Online. 15 May 2004

[3] http://www.blonnet.com/2004/05/15/stories/2004051500081000.htm

[4] Bajpai, N; & Dasgupta, N. 2004. What constitutes foreign direct investment? Comparison between India and China. CGSD Working Paper No.1, The Earth Institute at Columbia, pp. 25.

[5] Bhattacharyya, B; & Palaha, S. 1996. Policy Impediments to Trade and FDI in India. Wheeler Publishing, New Delhi.

[6] Ghosh, P. 2003. India Sees FDI Differently. Rediff India Abroad, 6 January 2003.

[7] http://www.rediff.com/money/2003/jan/06fdi.htm

[8] Huang, Y. 1998. FDI in China: an Asian perspective, Hong Kong: Chinese University Press; Singapore: Institute of Southeast Asian Studies.

[9] Huang, Y. 2007. Assessing financing constraints for domestic private firms in India and China: evidence from the WBES survey. In Prime P.B; and Kulkarni K.G; (Ed), Economic development in India and China. Serials Publications, New Delhi.

[10] The Hindu, June 30, 2003. India to Adopt Global Norms for Compiling FDI Inflows.

[11] http://www.hinduonnet.com/businessline/2003/07/01/stories/2003070102330300.htm

[12] IFC. 2002. International Finance Corporation, 2002 Annual Report.

[13] http://www.ifc.org/AnnualReports/ar2002/

[14] John, E. 2002, Round-tripping–FDI, The Financial Express, 5 June 2002.

[15] Nagaraj, R. 2003. Foreign Direct Investment in India in the 1990s: Trends and Issues. Economic and Political Weekly, Vol. 38, No. 7, pp. 1701–1712.

[16] Narasimhachary, S; & Gangadhar, V. 2006. Foreign Direct Investment: A Study of India and China. The Indian Journal of Commerce, 59(4), pp. 51–61.

[17] Pfeffermann, G. 2002. Paradoxes: China vs. India. Paper presented at the Private Sector Development Forum 2002, April 23–24, World Bank, Washington, D.C.

[18] Prime, P.B. 2007. Research on India and China: interconnections and comparisons. In Prime P.B; & Kulkarni K.G. (Ed), Economic development in India and China. Serials Publications, New Delhi.

[19] Raj Kumar. 2004. FDI in India: Some Facts and Views. Banking Finance, pp. 5–9.

[20] Sicular, T. 1998. Capital Flight and Foreign Investment: Two Tales from China and Russia. World Economy, vol. 21 no. 5, pp. 589–602.

[21] Srivastava, S. 2003. What is the True Level of FDI Flows to India? Economic and Political Weekly, February 15.

[22] United Nations Conference on Trade and Development. 2005. Prospects for Foreign Direct Investment and the Strategies of Transnational Corporations, 2005–2008. New York and Geneva: United Nations Publication, pp. 60.

[23] Vidyasagar, N. 2005. FDI inflow numbers may spiral if accounting system is altered. The Times of India, 10 February 2005.

[24] http://timesofindia.indiatimes.com/business/india-business/FDI-inflow-numbers-may-spiral-if-accounting-system-is-altered/articleshow/1017584.cms

[25] Wei, S. 2000. Sizing up foreign direct investment in China and India, Centre for Research on Economic Development and Policy Reform Working Paper No. 85, Stanford University, December.

[26] Xia, 2007. People's Republic of China’s round-tripping: scale, causes and implications, ADP Institute Discussion Paper No. 7, 2007.