SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC DOI: 10.1177/097380100900300305 Foreign Firms and Inter-industry Spillovers in Indian Manufacturing: Evidence from

Foreign direct investment (FDI) has benefi ts both for the host country and the home country. Multinational corporations or foreign fi rms are supposed to have frontier technology, which are expected to have spillover effects on local fi rms when they enter a country. Most studies on Indian industry have focused on intra-industry spillovers and have found some evidence of this. The present study’s focus is on inter-industry spillovers (for example, from auto-components to assemblers) on which there are few studies, as the literature unambiguously expects inter-industry spillovers to occur. This paper establishes the presence of spillover effects on domestic fi rms due to horizontal, backward and forward linkages with foreign fi rms in the Indian manufacturing industry, which affect domestic fi rms ’ productivity. It also establishes that inter-industry spillovers are negative for some industries