India: Competitiveness and the
Impact of Foreign Investment
Professor Michael J. Enright
Pierre Choueiri Family Professor of Global Business
D’Amore-McKim School of Business, Northeastern University
and Director, Enright, Scott & Associates (ESA)
m.enright@northeastern.edu or michaelenright@enrightscott.com
(c) Copyright Michael J. Enright, 2023 1
2/23/2023

A “new” competitiveness index, the
“ESA-Productivity Competitiveness Index” (ESA-PCI)
• Existing sources, good data compilations,
but they…
• Don’t measure the right thing
• Mix performance and “explanatory” variables
• Have potential researcher bias
• Overuse survey responses
• Use insufficient response numbers
• Not random samples
• Scale compression bias
• Competitiveness is often not “additive”
• The ESA-PCI index
• Based purely on performance
• Simple, can calculate from transparent
sources (WB, WDI)
• Focused on productivity, using a better
measure than usual for this purpose
• Available for over 180 countries
• Creates a performance benchmark that
one can try to explain
• “Rewards” economies for the right
things, not the wrong things
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ESA-PCI= GNI/Pop15-64 rescaled so the maximum value = 100

India has been improving in ESA-PCI versus the median…
2.3% 1.8%
23.7%
36.4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
India % of Max India % of Median
2/23/2023 (c) Copyright Michael J. Enright, 2023 3
ESA-PCI: India vs Max and Median
Source: Enright, Scott & Associates

…and its ranking shows modest improvement…
104
147
117
187
0
50
100
150
200
250
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
India Rank Number Ranked
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ESA-PCI: India Rank and Total Economies Ranked
Source: Enright, Scott & Associates

My historical India “wish list”…
Education
Infrastructure
Urbanization
“Getting things done”
Foreign investment
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My historical India “wish list”…
0
20
40
60
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Urbanization Rate, %
India World
0
50
100
150
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
India Rank, WB Ease of Doing Business
2/23/2023 (c) Copyright Michael J. Enright, 2023 6
0%
50%
100%
150%
2007
2010
2012
2014
2016
2018
India Rank, WB Logistics Index
India % of Max India % of Median
1987/8 1993/4 1999/00 2007/8 2014/5 2017/8
Male 60.6 65.5 69.2 76.6 80.3 81.5
Female 31.6 37.9 43.8 54.9 61.8 64.6
Gap 28.9 27.6 25.4 21.7 18.5 16.9
Literacy Rate, %

India’s stock of inward foreign investment has been rising
rapidly, reflecting new policy directions (along with GNI)…
0
100
200
300
400
500
600
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
FDI
Stock
USD
billion
GNI
USD
billion
India GNI LHS India FDI Stock RHS
2/23/2023 (c) Copyright Michael J. Enright, 2023 7
India GNI / FDI Stock, Current USD
Source: UNCTAD

…and India has jumped in terms of FDI intensity in GDP…
0%
32%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45% 1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
India % of Max India % of Median
2/23/2023 (c) Copyright Michael J. Enright, 2023 8
FDI Stock/GDP: India vs Max and Median
Source: UNCTAD; Enright, Scott & Associates

…but is not taking as much advantage of FDI as many others…
124
176
134
202
0
50
100
150
200
250
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
India Rank Number Ranked
2/23/2023 (c) Copyright Michael J. Enright, 2023 9
FDI Stock/GDP: India Rank and Total Economies Ranked
Source: UNCTAD; Enright, Scott & Associates

But how should we think of the benefits of FDI?
From Flows to Stocks to Operations to Impact
(US and EU FDI into India as examples)
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Some data sources
• Reserve Bank of India
• Savings rates, GDP /GDP breakdowns, etc.
• FDI statistics and surveys
• US BEA
• Mandatory surveys of the foreign
operations of US firms
• Includes investment and operational data
for foreign affiliates, industry-by-industry
• Reports data for All Foreign Affiliates (AFAs)
and more complete data for Majority
Owned Foreign Affiliates
• “Sees through” intermediary locations
• Some data gaps related to disclosure issues
• EU Eurostat
• Voluntary reporting operations of foreign
affiliates of EU firms based on national data
sources, also industry-by-industry
• Different EU nations have different
reporting requirements
• “Sees through” intermediary locations
• More limited data than available from the
US due to spotty reporting and worse
disclosure issues
• Asian Development Bank
• Input-Output tables for India 2010-2020
(35x35)
2/23/2023 (c) Copyright Michael J. Enright, 2023 11

Flows of inward investment are interesting…
3.1 3.1
3.8
2.6
4.1
3.8
4.9
3.6
0.7
2.8
0.6
-
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FDI
Flows,
USD
billion
Source: US BEA
(c) Copyright Michael J. Enright, 2023 12
2/23/2023
US FDI Into India, Annual Inflow

…but stocks show us what we are working with…
119
139 139 135 151 159 170
195
217 234 241
-
50
100
150
200
250
300
-
1
2
3
4
5
6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total
Assets,
USD
billion
FDI
Flows,
USD
billion
Total Assets FDI Inflow
Source: US BEA
(c) Copyright Michael J. Enright, 2023 13
2/23/2023
US FDI Into India, Annual Inflow and Stocks

…and it only gets real when we get to operations…
128
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
USD
billion
Total Sales Net Income Employee Compensation
Source: US BEA
(c) Copyright Michael J. Enright, 2023 14
2/23/2023
USAFA Operations in India

…we start to see value and where it goes…
49 60 65 69 72 71 73 80
92 100 93
12
14
15 17 19 20 22
24
25
29
30
5
5
4 4
5 6 6
8
6
5
4
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
USD
billion
Other Costs and Taxes Employee Compensation Net Income
Source: US BEA
(c) Copyright Michael J. Enright, 2023 15
2/23/2023
USAFA Operations in India

…to go further, we need tools, those of Economic Impact Analysis...
2/23/2023 (c) Copyright Michael J. Enright, 2023 16
Direct Impact on
Output (A)
Direct Impact on
Value Added (B)
Direct Impact on
Employment (C)
Indirect Impact on
Output (D)
Indirect Impact on
Value Added (E)
Induced Impact on
Output (G)
Induced Impact on
Value Added (H)
Induced Impact on
Employment (J)
Output of goods
and / or services
Demandin the
supplychain
Demandfor
consumergoods
Indirect Impact on
Employment (F)
Total Impact
on
Output
A+D+G
Total Impact
on
Value Added
B+E+H
Total Impact
on
Employment
C+F+J
Estimatedby usinginput-outputtables
• Economic Impact Analysis estimates the impact of an
investment and the subsequent operation of businesses
on an economy.
• Takes into account the activities of investing companies
(direct impacts), ripple effects through supply chains
(indirect), and effects of consumer spending of direct and
indirect employees (induced).
• Typically employed for single investments, such as a new
highway, exhibition center, tourist attraction, etc.
• ESA has modified the “usual methodology” (generating
multipliers from Input-Output tables and applying them
to operational cash flows) to estimate the impact of FDI /
Foreign Invested Enterprises (or Foreign Affiliates) across
entire economies (Lots of technical details).

The USAFA value added impact is larger than we might
have expected…
-
20
40
60
80
100
120
140
160
180
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Value
Added,
USD
billions
Direct VA Indirect VA Induced VA
USAFAs Value-Added Impact on India’s Economy
Source: Enright, Scott & Associates
(c) Copyright Michael J. Enright, 2023 17
2/23/2023
164

…as the annual impact on India’s GDP
has been 20-30+ times the annual FDI inflows…
20 24 21
34 22 25 22
34
220
60
254
0
50
100
150
200
250
300
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
USAFAs Value-Added Impact / FDI Flow
Source: Enright, Scott & Associates
(c) Copyright Michael J. Enright, 2023 18
2/23/2023

India is still a growth story for USAFAs rather than a
profitability story when compared to ROW…
3.3%
1.7%
23.8%
0%
5%
10%
15%
20%
25%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
USAFAs in India
ROS India ROA India
Compensation/Sales
17.5%
3.9%
10.0%
0%
5%
10%
15%
20%
25%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
USAFAs Global
ROS Global ROA Global
Compensation/Sales
(c) Copyright Michael J. Enright, 2023 19
2/23/2023
Source: BEA, Enright, Scott & Associates

…and USAFAs help add USD15-$20+ to India’s GDP for
every USD 1 they make in profit…
13
15
20 20
17 17 18 16
22
32
39
0
5
10
15
20
25
30
35
40
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Enright, Scott & Associates
(c) Copyright Michael J. Enright, 2023 20
2/23/2023
USAFAs Total Value-Added Impact / Net Income

While the EU data is less complete, the impact is also
relatively large (and likely significantly understated)…
-
10
20
30
40
50
60
70
80
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Value
Added,
USD
billions
DIRECT VA INDIRECT VA INDUCED VA
Source: Enright, Scott & Associates
(c) Copyright Michael J. Enright, 2023 21
2/23/2023
EUAFAs Value Added Impact
on India’s Economy
174

…so the estimated USAFA + EUAFA impact is ~8.5% of GDP…
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
%
of
GDP
USAFA VA EUAFA VA
Source: Enright, Scott & Associates
(c) Copyright Michael J. Enright, 2023 22
2/23/2023
USAFA + EUAFA Value-Added Impact, % of India’s GDP 8.5%

…and the impact of all FDI into India in 2020 was estimated at
USD 589 in GDP contribution or 22% of India’s GDP and rising…
Source: Enright, Scott & Associates estimates, based ESA calculations and RBI FDI surveys, which are partial
(c) Copyright Michael J. Enright, 2023 23
2/23/2023
World FDI Value-Added Estimated Impact
Likely understated due to data availability
206 219 245 242 243 249 281
446
494
605 589
12.3% 12.0%
13.4% 13.0% 11.9% 11.8% 12.3%
16.8%
18.3%
21.4% 22.1%
0%
5%
10%
15%
20%
25%
30%
35%
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
%
of
India’s
GDP
Total
VA
Impact,
USD
billion
Total VA % of India GDP

We have also seen FDI have additional benefits as well
as costs in other economies in which we have worked…
• Potential Benefits
• Capital in, exports out
• Technological spillovers
• Managerial spillovers
• Building supply chains
• Building distribution capabilities
• Bringing CSR / ESG practices, reporting
• Building marketing capabilities
• Setting up global research
• Developing human resources
• Etc.
• Potential Costs
• Crowding out of local firms
• Environmental, labor practice “dumping”
• Abuses by global oligopolies
• Lack of local accountability
• Data security, secrecy issues
• Corruption
• Export of talent
• Lack of local commitment
• Etc.
• Confident, effective states can often
manage both the benefits and costs
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… So, in conclusion
• India’s competitiveness trends are positive, but there is a way to go
• Preliminary investigation suggests that changes in India’s approach towards FDI are
already bearing fruit and promises to bear more in the future; more complete
analysis is needed to estimate the full impacts
• Focusing on the flow-stock-operations-impact combination should be part of
analysis of policies and / or programs regarding FDI (for companies too)
• India is already looking at the first three (flow-stock-operations are in RBI data)
• Active management of the FDI process holds the most promise for obtaining the
benefits while minimizing the costs
• How to attract FDI? Openness, growth, infrastructure, workforce, consistent
legal/regulatory regime, “things work”, expat life, etc. Fodder for another time…
2/23/2023 (c) Copyright Michael J. Enright, 2023 25

Thank you!
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