Role of Foreign Direct Investment in India's Manufacturing Exports and Fiscal Decentralization

The study is an empirical analysis of the role of FDI in India's manufacturing exports during the period 1990-1 - 2003-4. The study assumes importance in view of the fact that manufacturing export constitutes 60 per cent of the total exports in the post reform period and the spurt in FDI flow too took place in the above period. The study also analyses the determinants of fiscal decentralization at the sub- national level for the period 1990-91 - 2001-02. The theoretical arguments for the regression analysis of both the above aspects are based on earlier studies. Flow of FDI is found to be an important factor influencing manufacturing exports. GDP as a proxy for domestic demands; world income and unit value of exports/world unit value ratio are the other important variables influencing manufacturing exports. As regards sub-national level FDI flows, the state of Maharashtra, Delhi, Gujarat, Karnatka, Tamil Nadu and Andhra Pradesh hold the first six positions. Of the sixteen states examined, the NSDP per capita is the highest for Kerala and the lowest for Bihar. Fiscal Decentralization has been measured in terms of state expenditure as a ratio of total expenditure (centre and state). NSDP per capita and size of population are found to be significant determinants of fiscal decentralization.