In spite of India having a vast domestic market, an enhanced network of bank branches, financial institutions and well-organized capital and money markets, the Indian Diaspora has not come forward as active investors in the Indian economy in the scale that was expected post liberalization in the early 1990s. Rather, Diasporic FDI, in comparison to China, has been very modest in India
The table below presents the data for overall FDI inflows and the percent of gross capital formation accounted for by FDI.
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Overseas Chinese contribute two- thirds of the total FDI flows in China. Around
50-60 percent of the FDI has been flowing from ethnic Chinese dominated economies of
Taiwan, Hong Kong and Singapore.
Contributions of the Indian Diaspora, in contrast, have largely been by way NRI remittance flows and short-term portfolio investments. The share of the diasporic FDI in total FDI in India between 1991-2003 is around 4.18 percent, amounting to only $ 10 billion. On the other hand, the NRI remittances are three times that of the FDI inflows in the country.
Overseas Indians primarily send remittances to family members to support them for their survival. Apart from improving their living standards, they are invested in consumer goods, housing and land, and bank deposits. Very rarely are these remittances used to establish new businesses.
The following table indicates the increasing NRI remittances outpacing the increase in the net NRI deposits in the country.
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State-wise Investment
The next table shows that states in Southern India are far more investment active compared to the states in Northern, Eastern and Western Region. Following primary surveys, it has been reported that Maharashtra gets the maximum amount of FDI followed by Andhra Pradesh, Tamil Nadu etc. Metropolitan cities like Delhi, Hyderabad and Mumbai have supported a large number of investment projects of the Indian Diaspora.
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Source: Overseas Indian Facilitation Centre
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