South-South FDI vs North-South FDI: A Comparative Analysis in the Context of India

Over the years FDI activities from developing countries have grown very rapidly and most ofthese investments end up in other developing countries. Such FDI flows are formally known asSouth-South FDI. This paper attempts to compare the characteristics of South-South FDI versusNorth-South FDI in the context of India.The analysis is carried at two levels. First we look at the overall trends of FDI flows (bothinward & outward) region wise (North versus South), country wise and sector wise. Our resultsconfirm that India's FDI activities have broadly been consistent with the well known concept ofInvestment Development Path (Dunning, 1981). We also find that while country profiles haveundergone changes, there has been no significant shift in the sectoral profile.Next we carry out econometric analysis at the sectoral /industry level for inward FDI from theNorth and from the South to examine the difference in the characters (if any) of FDI from thetwo sources. Our broad conclusion is that although there is not much difference between FDIfrom the north and from the south (both being concentrated in sectors with larger markets, higherexport orientation & lower import intensity) southern FDIs appear to flow more into growingsectors while FDI from north do not have such indication.