The Federation of Indian Chambers of Commerce and Industry (Ficci) has called for an action plan to attract increased foreign direct investment (FDI) in India's manufacturing sector, in order to arrest its downtrend.
Despite the current liberal FDI policy and the huge size of the domestic market, FDI flows to India's manufacturing sector still remain much below the market potential, a study by the industry body showed.
Foreign direct investment in the manufacturing sector in India was a mere $3.4 billion since January 2000 against $40 billion in China's manufacturing sector in a single year, according to a Ficci study.
''While over 67 per cent of China's total FDI goes to the manufacturing sector, it is only 37 per cent in the case of India,'' it said, adding, ''The country needs an action plan, which would help in attracting FDI of $12 billion per year in the manufacturing sector alone, for the next five years.''
The Ficci study also showed a few areas where gaps needed to be plugged in order to attract more investments. These include sub-sectors such as industrial machinery, agricultural machinery, ship building, medical & surgical devices and computer hardware.
''India continues to import a large amount of such machinery and equipment in the absence of sufficient domestic capacity to meet demand'', the study noted.
Technological transfer and absorption is one of the major benefits of FDI. But this has not happened to the extent desired especially in small and medium enterprises (SME) sectors, it added.
The study suggested measures like adopting 'swap technology for market' policy as is the case in China, rationalising complex regulatory procedures and reducing delays in project approvals.