Foreign direct investment and industrial agglomeration: Evidence from India

This study analyses the spatial and sectoral distribution of Greenfield Foreign Direct Investment (GFDI) and its impact on industrial agglomeration in India for the time period 2006–2015. We employ a unique dataset obtained by merging GFDI data from FDI Markets and plant level data from Annual Survey of Industries (ASI). We find that the Indian manufacturing sector shows signs of industrial dispersion rather than agglomeration throughout the sample period. Likewise, the spatial distribution pattern of GFDI also shows a decline in regional concentration and, interestingly, GFDI also seems to target new destinations. We also find that the increased spatial spread of GFDI leads to an industrial dispersion in Indian manufacturing industries.