A STUDY ON IMPACT OF COVID-19 ON INDIAN INWARD FOREIGN DIRECT INVESTMENT

Abstract

Over time the importance of Foreign Direct Investment is elevating around the world. It not only flourishes the economy with funds but also brings in other benefits like technology and expertise. Moreover, it is a capital infusion without any debt burden on the economy. The covid-19 pandemic has carried a negative economic growth rate and employment ratio in the world (World Bank indicators). Specifically, the Gross Domestic Product growth rate and employment ratio in India were reduced by 7 percent and 8 percent in 2020. In these circumstances, FDI can provide a major boost to the economy. This paper attempts to find out the impact of Covid-19 on inward Foreign Direct Investments by comparing the pre-covid-19 investments with investments during covid-19. The paper investigates the impact on a world level and BRIC nations. It further examines the impact of the pandemic on India’s inward FDI through the impact on components of FDI and the impact on sector-wise, country-wise, and region-wide distribution. The paper concludes that global investments were reduced by 34 percent and among the BRIC nations, Russia was the most affected country. In India, the correlation between inward FDI and covid-19 is positive and significant. The positive growth is influenced by the covid-19 pandemic-driven investment in the drugs and pharmaceuticals sector and Facebook’s big investment in Reliance-jio. Investments from Mauritius were reduced by considerable volume but investments from the U.S.A soared despite the pandemic. Except for the west zone which can be attributed to investments in Gujarat, investments in all other three zones were reduced during covid-19. The Indian investments were centralized with 82 percent of total investments in Gujarat, Maharashtra, Karnataka, and Delhi.