Foreign Direct Investment Inflows In India Research Articles

Does foreign direct investment cause economic growth in India? An econometric analysis

With the lack of finance, many developing nations are struggling for investment in several areas to generate an opportunity for sustainable livelihood, and Foreign Direct Investment (FDI) emerged as an engine of economic growth, especially in developing nations. It helps to strengthen the economy by mainly promoting capital inflow and technical improvement into the recipient economies. However, some literatures found economic growth, responsible for the inflow of FDI. Therefore, this paper attempts to examine the causal relationship between FDI and Economic Growth in India. By running the Granger causality test in VECM settings, this study found, GDP causes inflow of FDI in India.

Role of behind-the-border factors in determining state-level differences in FDI inflows to India

PurposeAlthough India is seen as a key player in the global economy, it is still below its potential level of growth. In this age of globalism, integration with the global economy through trade and foreign investments fosters domestic growth. For India, although this integration has strengthened over the years, there are certain gaps that remain to be addressed. Though numerous studies in the literature have tried to find answers to these questions, an important aspect that has not been considered by these studies relates to India’s federal structure and the role of states in determining the aggregate economic outcome. As Foreign Direct Investment (FDI) inflows to India are concentrated in a few states, this paper aims to provide an assessment of the reasons behind this trend.Design/methodology/approachThis paper aims to investigate the reasons behind the interstate differences with respect to FDI inflows in India. The analytical work undertaken for this paper is based on secondary data, collected and collated from various sources. The approach adopted for this paper includes a heat graph analysis to examine whether there is a clear pattern in terms of the state-specific factors for high FDI states versus the low FDI states. This data analysis is followed by an econometric estimation to gauge the impact of state-specific factors in determining the FDI inflows.FindingsAs per the secondary data–driven heat graph and econometric analysis, factors like industrial output, social sector expenditure, judicial quality, connectivity indicators, labor cost and availability of credit, act as differentiators between high and low FDI-receiving states. It then becomes imperative to bridge the gap between the two sets of states in terms of these specific factors. Implementation and success of policy interventions can only be derived at the state level and therefore needs more decentralized approach.Originality/valueThis paper tries to identify the reasons that are responsible for FDI inflows being concentrated in a few Indian states. This involves a comprehensive analysis of several variables to understand whether there is a clear pattern where high-FDI states are also in a better position with respect to these attributes. This effort to factor in the federal aspect of a macroeconomic indicator like FDI provides new dynamic to this area of work.

Foreign Direct Investment in Automobile Sector in India

India believes that manufacturing is crucial for national development, and the manufacturing sector contributes significantly to the country's GDP. Among various production sectors in India's manufacturing industry, foreign promoters have played a noteworthy economic role. The automobile industry and its auto components sector hold a prominent position in the global market. This paper focuses on the growth of Foreign Direct Investment (FDI) inflows in the Indian Automobile sector and examines the impact of the industry's size on FDI inflows. Notably, during the financial years 2021-2022, FDI in the Indian Automobile sector witnessed a remarkable growth of 326.1164%, ranking fifth in attracting the highest FDI inflows. The size of the industry holds a significant influence on the growth of FDI inflows in India.

How Corruption Distance Affects FDI Inflows in India?

As firms invest in foreign countries, they face additional costs of doing business in the form of liabilities of foreignness. The liabilities of foreignness are aggravated by the distance in the institutional environment of the home country in which the firms are embedded and the host country in which they invest. Within this context, the aim of this research paper is to examine if a specific form of institutional distance, that is, corruption distance, affects the quantum of inward foreign direct investment (FDI) in India, which is a large emerging market and an important receiver of global FDI flows. Using country-wise FDI inflows data from 2008 to 2020, the results of panel autoregressive distributed lag (ARDL) method reveal the presence of a long-run relationship between FDI inflows and corruption distance between India and the home country of the investor firm. The disequilibrium in the long-run relationship, if any, gets adjusted at the rate of 38.1% per year. The findings also suggest that an improvement in the control of corruption is expected to lead to greater FDI inflows in the country, thereby providing an important policy implication. To attract FDI and to fully realise its benefits which are essential for an emerging country like India, policymakers need to make concerted efforts to control the level of corruption.

Foreign Direct Investment in India: A Trends Analysis

Foreign capital plays an important role in the development of developing countries whose domestic capital is not sufficient to fulfill their domestic requirements. Foreign Direct Investment (FDI) is an important part of the foreign capital which fills this gap in the domestic savings and thus plays a crucial role in the developmental process. This paper tries to analyze the trends of foreign Direct Inflows in India during the period 2000-01 to 2020-21. Our analysis shows a sharp rise in the FDI inflows in India during the chosen study period which is the period after a decade of economic reforms in India. However, the study shows some fluctuations in the FDI inflows which have been analyzed in the paper.

Does FDI Generate Employment? An Empirical Study of Indian Service Sector

<p>Foreign Direct Investment (FDI) considered as a component of investment is needed by India to accomplish the ambition behind economic reforms and speed up the growth of the economy. The inflow of FDI in India initially was low due to regulatory policy framework but there is a sharp rise in investment flows from 2005 onwards as the new policy has broadened. The purpose of this paper is to look for evidence regarding the precise relationship between FDI inflows and employment in service sector of India. The used Auto-Regressive Distributed Lag (ARDL) model explains long run and short run relationship between FDI inflows and employment in service sector. The empirical results confirm that though negative relationship exists between FDI and employment in service sector but it is not statistically significant. According to the findings, FDI introduces skilled skewed technical changes to the host country, increasing demand for highly skilled employees. Because India’s labour force is relatively unskilled, FDI in the service sector fails to provide jobs for the country’s rising labour force. The ARDL results also confirm the existence of the long run co-integration between FDI and employment in service sector. The finding shows that the stock of the FDI is a significant factor for Indian service sector.</p>

Economic Factors and Foreign Direct Investment in India: A Correlation Study

Foreign Direct Investment (FDI) plays a pivotal role in the process of economic development particularly in the capital scarce country, where the domestic base of created assets like technology, skills and entrepreneurship are quite limited. It provides financial resources for investment in a host country and thereby augments domestic saving efforts. It also plays an important role in accelerating the pace of economic growth. FDI provides the much-needed foreign exchange to help the bridge the balance of payment or trade deficit. FDI brings complementary assets such as technology, management and organizational competencies and there are spillover effects of these assets on the rest of the economy. FDI is treated as a main engine of economic growth and technological development which provides ample opportunities in accelerating economic development. FDI contributes to exports directly and an enhanced export possibility contributes to the growth of the host economies by relaxing demand side constraints on economic growth. The present study adds to the existing literature on determinants of FDI by examining the degree of correlation between FDI inflow in India and several economic factors like exchange rate, GDP, openness of trade etc.

Exploring the Growth of Indian’s Foreign Direct Investment Equity Inflow amid Covid-19 Outbreak

Purpose: The aim of this paper is to explore the growth of Indian’s Foreign Direct Investment (FDI) equity inflow amid Covid-19 outbreak. Design/methodology/approach: in-depth review of current and previous literatures from journals and periodic publications of legitimate organizations both local and international on the evolution and the trend of Covid-19 pandemic as well as it impacts on Indian’s FDI was conducted. Findings : The findings however revealed a major drop in net FDI flows globally, but on the contrary, a significant increase was recorded in India. Secondly, key sectors such as services sectors, computer software and hardware, telecommunications, trading, automobile, construction development, chemicals, and pharmaceuticals was revealed to have attracted the maximum FDI inflow to India amid the Covid-19 pandemic. Practical implications: The study recommended that a cohesive policy that further strengthens FDI by identifying and creating incentives for other main industrial sectors could further promote the continued attractiveness of FDI to India. Originality/value: The current study is an original contribution in the field of FDI inflow in India amid the COVID pandemic.

Is Democracy Necessary for Foreign Direct Investment Inflows in India?

India has developed a positive attitude towards the foreign direct investment (FDI) inflows during the last five years and made several changes in the market conditions, enhanced civil rights and liberties to attract more FDI inflows. This study examines the impact of democracy on FDI inflows in India by employing an autoregressive distributed lag (ARDL) model. For the said purpose, the study uses the annual data from 1980–2017. The findings demonstrate that the democratic setup does not induce FDI inflows in the short run, but there is a positive and significant impact of democracy in the long run. Furthermore, it confirms that gross national income per capita; trade openness, political rights, and civil liberties are significant and positive determinants of FDI inflows in India. Based on findings, this study recommends that India nurture democratic values, property rights security, and values of civil liberty & freedom to appeal for more foreign investment inflows into India progressively. JEL Codes: D73, C22, F14

Foreign Direct Investment in India: Emerging Trends and Patterns

This paper examines the trends in foreign direct investment (FDI) in India during 1980-2018 and the emerging patterns of the FDI inflows in the country during the last two decades (i.e., 2000 - 2019). Our analysis, based on the secondary data collected from UNCTAD and DPIIT, reveals that the ongoing FDI liberalization measures started in India since 1991 have resulted in a dramatic upsurge in the FDI inflows as well as a stock of FDI in the country. The share of India in the global FDI inflows has increased in the post-liberalization period. Still, there was no perceptible increase in India’s share in the global FDI stock during this period. Detailed examination of the patterns of the FDI inflows in India revealed that the equity capital had been the largest component of the FDI in India.Moreover, its share in the total FDI inflows has been increasing during 2000 and 2019. Mauritius and Singapore have been the two important sources of FDI inflows into India, contributing more than half of the FDI flows during the last two decades; this was mainly because these countries were considered as tax heavens for investors from other counties for routing their investments to India. Sector-wise distribution of FDI in India during the last two decades of the post-liberalization period (i.e., during 2000 - 2019) has shown that the service sector has emerged the largest recipient of FDI replacing the manufacturing sector. Our analysis has clearly shown the impact of liberalization on enhancing the FDI flows as well as stock in India and also in changing patterns of FDI distribution in the country.

Dimensions of Foreign Direct Investment Inflow in India After 1991

Foreign Direct Investment (FDI) has emerged as an important topic for researchers and policymakers in India. The present study analyze the dimensions, i.e., current status, global position, trends, growth, sources, sectoral composition, regional distribution, and the determinants of FDI inflow in India after the economic reforms in the year 1991. Furthermore, this piece of research answers an important question, i.e., whether the currency area hypothesis of Aliber (1970) is good enough to explain FDI inflow in India during 1991 – 2018? The study uses trend analysis and simple linear regression analysis to analyze the data. The findings of this research have shed light on some of the important aspects of FDI inflow in India. The inward FDI in India has increased from the US $75 million in 1991 to the US $42285.68 million in 2018, registering an annual average growth rate of 37.85 per cent. This study also finds that the increase in the value of Indian Rupee has an inverse impact on the FDI inflow. Thus, the findings support the currency area hypothesis of Aliber (1970) . It suggests that policymakers should consider the exchange rate while formulating policy to attract FDI inflow into India.

Sector -Wise Performance of FDI Equity Inflows in India

Foreign Direct Investment (FDI) plays an important role in the development process of a country. It has the potential for contributing to the development through the transfer of financial resources, technology and innovative and improved management techniques along with raising productivity. Developing countries like India need substantial foreign inflows to achieve the required investment to accelerate economic growth and development. It can act as a catalyst for domestic industrial development. Further, it helps in speeding up economic activity and brings with it other scarce productive factors such as technical knowledge and managerial experience, which are equally essential for economic development. India has been the most significant beneficiary of remote direct interest in most of its various segments. It likewise assumes a significant job in the advancement of a nation. India is the biggest popularity based nation with the second biggest populace on the planet, with the standard of law and exceedingly instructed English talking work power, the nation is considered as a sheltered spot of assurance for outside financial specialists. The study covers the performance of FDI Equity inflows in India and the sector-wise performance of FDI Equity inflows in India. The samples of sector-wise FDI inflows in India are selected based on the convenient sampling method. A Sample of 10 sectors has been selected based on the availability of data. The inflow of FDI in the media transmission and Constrictions utilizing combined example t’ test P worth is 0.049 (Less than the estimation of 0.05). Henceforth we may accept the invalid speculation with 95% certainty. The Construction (foundation) exercises and Power utilizing combined example t’ test. P worth is 0.016 (Less than the estimation of 0.05). Subsequently, we may accept the invalid theory with 95% certainty

Book Review of “India’s Recent Inward Foreign Direct Investment: An Assessment”

This book is focused on analysing the limitation of the existing Foreign Direct Investment (FDI) statistics in India. The trends, composition and quality of FDI inflows in India after the initiation of ‘Make in India’ (MII) policy are critically analysed. This is done with a comparative perspective on the nature and quality of FDI since 1990.

The Dubious Relationship Between Make in India and Foreign Direct Investment: The Story So Far and the Road Ahead

Campaigns like ‘Make in India’ (MII) rely on inviting foreign direct investment (FDI) into India to garner the benefits of spillover effects, although the pieces of evidence so far confirm the opposite due to the weak targeting of the factors determining FDI transfers. Thus, the current study explores the key components that shall be sufficiently pursued in order to assign relevance to such governmental campaigns and foreign capital movement for the future capacity building. In order to determine the same, the present study addresses it descriptively by a non-econometric study based on correlation and linkage with key components like manufacturing Purchasing Managers’ Index, employment creation, Index of Industrial Production and FDI restrictiveness index and empirically by applying the Granger causality tests (post unit root stationarity conversion) between the key factors of FDI and FDI inflows in India from 2000 to 2016 (from the eclectic paradigm of OLI [Ownership, Location and Internalization] factors) in the light of the MII campaign. The result indicates that the ease of doing business, gross domestic product growth rate and exchange rate volatility are the prime factors contributing to the inflow of FDI in India. Therefore, the think-tanks will need to draft such a policy framework that enables the required boosting of these key elements to make campaigns like MII really promising in the Indian context. The same could be harnessed through the promotion of greenfield investments, adequate infrastructure, improved governance, tax reforms, rationalizing land and labour reforms, etc.

Does Good Governance Matter FDI Inflow? Evidence from India

Is there a relationship between governance and Foreign Direct Investment (FDI) adept in a presumed country? What is the importance of institutional set-up or governance in stimulating growth in a developing country? To answer this query, this study explores the distinction of good governance for FDI inflows in India for the time period of 14 years, i.e. from 1996 to 2012 by employing multiple regression models. Firstly, variance inflation factor (VIF) test shows that there is no perfect multicollinearity. Secondly, the empirical results evinced that institutional factors matter for huge FDI attraction in India. The paper evidence that India attract more FDI due to good governance, therefore it is acclaimed that government of India should take auxiliary steps to improve governance which can tempt more foreign investors and can help attain full employment, boost growth and can nurture per capita income.

Interstate Distribution and Sectoral Composition of FDI Inflows in India

Foreign direct investment (FDI) refers to obtaining the ownership in a foreign business entity. It can also be attributed that FDI circulates capital across national boundaries. It can be defined as an investor based in one country (home country), acquires an asset in another country (host country), with the intention to manage it. It is this dimension of management that distinguishes FDI from portfolio investment in foreign stocks and other financial instruments. For a terribly populated country like India, a good quantum of resource is needed to fund its various developmental needs, which the country does not have. To strengthen its infrastructure, expertise and knowledge base, FDI is inevitable. Realizing these facts, the government is now moulding a robust business environment to smoothen the flow of FDI. An interstate comparison of FDI in India makes it quite apparent that there exists huge variations in the inflow of FDI to different states. While some regions like Delhi, Bombay, etc. receive soaring flow of FDI, it is very stumpy in regions like Patna, Guwahati, etc. An overview on the sectoral distribution of foreign investment discloses the wide disparity in the distribution of foreign capital among various sectors. While some sectors like service, construction, etc. receive elevated flow of foreign capital, others lie fully ignored by the foreign investors. JEL Classification: F21, F23, F63, O10

FDI Inflows in India: An Analysis of the Trend During 2004–2018 and Future Projections for the Next Decade

Developing economies have been seeing an exhaustive rise of foreign direct investment (FDI) inflows all through the past two decades. Traditionally, India has pursued an enormously cautious approach; however, in 1991, India initiated the process of economic reforms towards a more open economy and got the sequence of processes to draw more FDI. The present study depends on the secondary data, and the time of the study is from 2004 to 2018. The FDI inflows have increased from US$5,777.8 million in 2004 to US$61,963.1 million in 2018. This article aims to present the descriptive analysis of FDI inflows in India during the selected period and also describes the long-term trend as well as the growth history of FDI inflows. The motivation behind this article is to make an effort to forecast the FDI Inflows in India for the coming years with the help of growth analysis, trend analysis and ARIMA (Autoregressive integrated Moving Average) forecasting. The result of future projections shows a positive trend indicating manifold increase in FDI inflows in India in the coming years.

Dynamics of Inter-States Variation of Foreign Direct Investment Inflows in India

With globalisation, flows of Foreign Direct Investment (FDI) in India have been increasing since 1991, in an overall sense. However the FDI inflows into different States in India have not grown uniformly. The purpose of the paper is to study the dynamics of inter state or regional variation of FDI inflows in India. The paper used the ranking method, Bodenhorn's mobility and turnover and Herfindahl-Hirschman Index for measuring inter-state variation of FDI inflows. The period of study is 1991-2016. The results show that more than 85 percent FDI inflow in India is concentrated in five states - Maharashtra, Delhi, Bangalore, Tamil Nadu and Gujarat. Maharashtra is getting more than 25 percent of FDI inflows in India. Remaining states are receiving less than 15 percent. The competition among Indian states is declining at the rate 9.5 percent per annum. The concentration of FDI inflows in a few states is increasing at the rate of 2.4 percent per annum. North-East states are receiving almost negligible amount of FDI. Government should undertake the survey to identify the potentiality of each state or regions to attract FDI. Government should devise the policy based on this potentiality inculcating attractive elements. So that foreign investors feel to invest in a particular state or the region. The state governments on their part should initiate reform measures to create conducive environment for the inflow of FDI.

A Study on the Impact of Foreign Direct Investment (FDI) on Indian Economy

Foreign Direct Investment (FDI) is fund flow between the countries in the form of inflow or outflow by which one can able to gain some benefit from their investment whereas another can exploit the opportunity to enhance the productivity and find out better position through performance. The effectiveness and efficiency depends upon the investors perception, if investment with the purpose of long term then it is contributes positively towards economy on the other hand if it is for short term for the purpose of making profit then it may be less significant. Depending on the industry sector and type of business, a foreign direct investment may be an attractive and viable option. Any decision on investing is thus a combination of an assessment of internal resources, competitiveness, and market analysis and market expectations. The FDI may also affect due to the Government trade barriers and policies for the foreign investments and leads to less or more effective towards contribution in economy as well as GDP of the economy Foreign direct investment (FDI) as a strategic component of investment is needed by India for achieving the economic reforms and maintains the pace of growth and development of the economy. The paces of FDI inflows in India initially were low due to regulatory policy framework but there is a sharp rise in investment flows from 2005 towards because of the new policy has broadened. Foreign direct investment (FDI) has been viewed as a power affecting economic growth (EG) directly and indirectly. The main purpose of the study is to analyse the impact of FDI on economic growth in India.

A study on foreign direct investment, economic stabilityand economic development-An empirical analysis

International Economic Integration plays an integrative role in Economic Development of any country. Foreign Direct Investment (FDI) is one and only major instrument of attracting International Economic Integration in an economy. It serves as a liaison between investment and saving. Many developing countries like India are facing the deficit of savings. This problem can be solved with the help of Foreign Direct Investment. Foreign investment helps in reducing the defect of BOP. The flow of foreign investment is a profit making industry like insurance, real estate and business services and serving as a catalyst for the growth of economy in India. With the journey of borderless economy and open competition on 24th July, 1991, the Indian production economy witnessed an unprecedented threats and challenges in the form of inward and outward capital infusion. Capital infusion have been realised with the influx of inward foreign direct investment. The FDI can affect directly the growth process and economic output of a nation. The most popular measure of economic output is GDP (Gross Domestic Product). The objective of this paper is to investigate and made an in-depth study the interactions and economic agglomeration between the economic growth, Capital infusion and economic stability of Indian economy in the period following the first generation financial sector reforms. Furthermore, the research study tries to estimates the relative roles of FDI, Exports and social well-being in the economic growth intermediation process. The study tries to tests for characteristics of movement of FDI and whether they have any assignable cause or bears any random shocks. The investigation also observes a relative responsibility and interactive long run relationship between a GDP, FDI, Economic stability and cultural agglomeration. The results indicate the importance of FDI on general, social, and economic growth and the relative roles of the internal economic environment in augmenting the growth process during this study period of 1980--2013. After analyzing all the facts it may be concluded that maximum global foreign investment's flows were went to developed countries rather than developing and under developing countries. Foreign investment flows are supplementing the scare domestic investments in developing countries particularly in India. Further this paper recommends that we should welcome the inflow of foreign investment because it enable us to achieve our cherished goal like making favourable the balance of payment, rapid economic development, removal of poverty, and internal personal disparity in developmental process and also it is very much convenient and favourable for Indian economy. During pre liberalization period of 1980–91 Inward FDI increased at CAGR of 10.39% while during first generation post liberalization period 1991–2000 it has grown 53.57% and second phase of post-liberalization period 2001–13 recorded a CAGR of 18.01%. This indicates that liberalization has had a positive impact on FDI inflows in India. Since 1991 FDI inflows in India has increased approximately by more than 191.85 times.