The present paper employs techniques from stochastic production frontier and panel data literature to test a spillover hypothesis for large sized ®rms that `presence of foreign-owned ®rms and foreign technical capital stock in a sector leads to reduced dispersion in eciency in the sector and fall is higher for the ®rms that invest in R&D activities'. Dispersion being a relative concept, it may still fall if both the leading foreign ®rm and domestic ®rms show fall in technical eciency over the period and the fall for the leader is higher and vice versa. Given the focus of the study, where concern is for the learning by the domestic ®rms, the study tries to get around with the problem partially, by testing the hypothesis for those local ®rms that have shown productivity improvement over the period. Results suggest that foreign-owned ®rms are close to the frontier in 13 of the total 26 sectors studied. Spillovers result for these 13 sectors indicate that there exist negative spillovers from the presence of foreign ®rms in the sector, but available foreign technical capital stock has a positive impact. Interesting dierences emerge when the sample is bifurcated into scienti®c and non-scienti®c subgroups. Results for the scienti®c subgroup indicate that the indirect gains or spillovers are not automatic consequence of foreign ®rm's presence, but they depend to a large extent on the eorts of local ®rms to invest in learning or R&D activities so as to decodify the spilled knowledge. On the other hand, the evidence of spillovers to non-scienti®c non-FDI ®rms is not very strong.