An Empirical Testing of Investment Development Path Theory in the Indian Context

Abstract

There has been a substantiated rise in the FDI flows (both inward and outward) across the globe since the 1990s. The most remarkable fact about the global FDI flows is that the share of developing countries in total FDI is continuously rising. India, being one of those important developing countries, has also seen a surge in both inward and outward FDI flows. The present study uses Dunning's investment development path (IDP) paradigm as a theoretical framework to examine long-term developments in India's inward and outward FDI. Its primary goal is to assess how far the country has progressed along its IDP. The study has analysed the annual time series data from 1991 onwards using the quadratic specification model as proposed by Dunning. The analysis indicates that India has reached the stage 3 of the IDP, with a few notable exceptions, the assessed IDP trajectory is in accordance with Dunning's model.