Abstract
The rate of foreign direct investment (FDI) inflow has been increasing each year in India Since liberalization of the Indian economy in 1991. It is considered as an important tool in promoting the economic growth of a country. To attract more FDI, Indian government reframes several of its tax policies including policies of direct and indirect taxes periodically. The aim of this study is to find the overall effect of corporate tax on FDI in India for the period 2000 to 2015. The study has also focused on the presence of three other determinants of FDI-GDP, exchange rate and Trade-openness. To achieve the objective of the study, time series analysis has been performed by using correlation and regression analysis technique. The study reveals that corporate tax has a negative impact on FDI in the absence of control variables GDP, exchange rate and Trade-openness. However, due to sparse corporate activities and less number of companies in existence, individual income tax and corporate income tax was amalgamated. However Jordaan (2004) stated that the impact of openness depends on the type of investment. Trade restrictions i.e. limited openness has positive impact on FDI in case of market seeking investments when foreign firms serving local markets build subsidiaries in host country.
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