India's foreign direct investment is expected to rise substantially from this month with the Reserve Bank of India incorporating many new components in the FDI basket in line with international practices.

Industry ministry officials said that the RBI, which was till now capturing inflows purely on the basis of issue/transfer of equity/preference shares of Indian companies to foreign direct investors, would from this month begin including additional components along with reinvested earnings.

"The revision of FDI data as per international practices will not only make our data more accurate and comparable, but also substantially improve the FDI inflow figures," they said.

As per the International Finance Corporation, adoption of international standards for computation could increase India's net annual FDI inflows to $8 billion from around $2-3 billion at present, they said.

A committee comprising representatives of the department of industrial production and RBI to go into the definitional issues relating to FDI had in its report submitted recently, recommended inclusion of reinvested earnings, swap, venture capital, external commercial borrowings, suppliers credit, investment by unincorporated entities, grant and control premium to be included in actual inflows.

Components as per International Monetary Fund definition includes equity capital, reinvested earnings and other capital such as borrowings, lending of funds, debt security and trade credits.

Officials pointed out that mere inclusion of reinvested earnings in FDI data is expected to enhance the figures substantially since a large number of multinational corporates have reinvested their earnings in India.

For instance, Citibank alone has reinvested more than $400 million in India, but it is not captured in the country's FDI reporting, sources said.

Another multinational company, Fiat, has brought in around $300 million in non-equity form of direct investment capital to compensate the losses made by its Indian subsidiary which is not reflected in the FDI figures, they said.

Sources pointed out that 'hundreds of millions' invested through the venture capital route do not form part of the FDI reporting which, if adjusted, could substantially enhance FDI data.

The committee had recommended that reinvested earnings and other capital, at present not included should be captured through survey by RBI by making the reporting system mandatory for the companies through modification of Foreign Exchange Management Act or the International Depository Receipts Act.

It has, similarly, suggested that the RBI should device a suitable reporting mechanism in order to segregate related entity transactions for inclusion of external commercial borrowings, suppliers credit and trade credit.

The changes in FDI data are being made since it has been felt that India's FDI reporting underestimates the actual inflows as it does not include several components which are included in international reporting.