ASSESSMENT OF THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT IN INDIA AND THE TOP-5 GDP COUNTRIES: A PANEL STUDY

Abstract

Foreign Direct Investment (FDI) is a pivotal factor that influences the financial management of a country. This study explores the repercussions of FDI originating from several foreign countries affecting India. These nations were selected based on the World Bank’s documentation of the top five countries in terms of gross domestic production. The research timeline spans 2018 to 2023. Among the ARCH models, the EGARCH model was the most suitable. The findings of this study reveal a symmetrical association in which the impact of spillovers or shocks appears negligible, whereas the GARCH effect persists. Moreover, an affirmative and noteworthy correlation with India was identified for China, Japan, and the United Kingdom, in contrast to the inverse relationship observed for Germany and the United States. This phenomenon holds, particularly during fluctuations in sentiment within developing countries, manifesting through economic activities with strong correlations. Despite this, investment prospects appear promising in developed countries, notably the US, leading to an outflow of foreign investment and a consequent reversal in trends.