India is not likely to adopt the International Monetary Fund's definition of foreign direct investment in totality.

The representatives of the central economic ministries and the Reserve Bank of India, who constitute a committee set up to redefine FDI, have differed over the elements that need to be included.

Some of the contentious issues are the reinvested earnings of foreign companies, inter-company debt transactions, short-term and long-term loans, financial leasing and trade credits. There are also differences over the regulation of FDI inflows.

While some of the inflows are monitored by the RBI, some are regulated by the Secretariat of Industrial Assistance in the commerce and industry ministry. The finance and external affairs ministries also play their part from time to time.

"India will have its own definition of FDI after discussing the elements that have been adopted the world over, including the one laid down by the IMF. While there is no doubt we are underestimating our FDI figures at present, we have to go by our own judgment. Our definition will suit our own regulatory framework," a senior RBI official said.

The official said more meetings would have to be held to thrash out the differences before a final decision was taken.

"We expect to take a decision in the next two months," the official said. This implies the government will not be able to implement the new definition from January 2003 as announced by the secretary, department of industrial policy and promotion, at a recent press conference.

It also means India will continue to release data on FDI inflows and approvals based on the existing definition, which widens the gap between India and China, for a few more months.

Government sources said a change in the definition would increase the country's FDI figures manifold, helping it project itself as a more attractive destination for foreign investment vis-a-vis China.

Currently, India's annual FDI inflows is around $4 billion, whereas China claims inflows worth $40 billion.

However, the two calculations are based on different elements. If the new formula was implemented, India's FDI inflows would shoot up to $9-10 billion a year, while China's FDI inflows based on the new formula would be around $17-20 billion, sources in the department of industrial policy and promotion said.

The RBI official, however, said no such estimates could be made since the elements had not been decided.

"The final figure could be even higher," he said.

China includes domestic money coming through Macau, Taiwan and HongKong in calculating its FDI inflows. If that is knocked off, the figures could come down to $20 billion.

Foreign investment in China attracts a lower corporate tax. India does not make such a distinction, but a significant amount still comes via places like Mauritius and Virgin Island.

The IMF definition of FDI includes as many as twelve different elements-- equity capital, reinvested earnings of foreign companies, inter-company debt transactions, short-term and long-term loans, financial leasing, trade credits, grants, bonds, non-cash acquisition of equity, investment made by foreign venture capital investors, earnings data of indirectly-held FDI enterprises, control premium and non-competition fee.

India, however, does not adopt any other element other than equity capital reported on the basis of issue or transfer of equity or preference shares to foreign direct investors.

China, on the other hand, includes all these in its definition of FDI. China also classifies imported equipment as FDI, while India includes these as imports in its trade data.