Determinants of foreign direct investment in India

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine the determinants of foreign direct investment (FDI) in India. Design/methodology/approach -Using macroeconomic variables -GDP, inflation rate, interest rate, patents, money growth and foreign trade -the authors tried to find the best fit model (ARIMA (p,d,q)) to explain variation in FDI inflows into India. The authors tested for various assumptions taken before applying autoregressive integrated moving average (ARIMA) such as heteroscedasticity, autocorrelations, etc. using standard tests and quantified FDI policy changes using dummy variables. Findings -It was found that of all macroeconomic variables taken, only GDP, inflation rate and scientific research are significant and that FDI Policy changes during years 1995-1997 have had a significant impact on FDI inflows into India.Research limitations/implications -The authors' econometric model explains 63 percent variation in FDI inflows into India. Implicitly, the balance 37 percent variation in FDI inflows is still unexplained and so further study should be undertaken with even wider scope in terms of macroeconomic variables such as exchange rate, etc. Practical implications -As a recommendation for future FDI policy planning and implementation, the authors suggest the Government of India gives resources towards variables that have been classified as significant in this paper, namely GDP growth and inflation rate and should open the economy further.Sectors not yet open to FDI investments should be opened and although inflation rate should be controlled but some inflation is beneficial. Originality/value -There has been no authoritative study until now to find "Determinants of FDI inflow to India" and this paper also goes a step forward and presents accurate models that can be used to forecast FDI inflows based on the macroeconomic variables considered.

Foreign direct investment into BRICS: an empirical analysis

“…The well-established and quality infrastructure is also an essential variable as a determinant of FDI inflows. Various scholars have measured infrastructure by different proxies (Kinoshita & Campos, 2003;Sahoo & Dash, 2009;Singhania & Gupta, 2011). In this study, the electric power consumption (kWh per capita) is undertaken as a proxy of infrastructure because it is an important instrument for economic growth.…”

Real Effective Exchange Rates and Foreign Direct Investment Inflows: Empirical Evidence from India’s Sub-National Economies

“…Unlike the vast literature on the determinants of FDI which exist for advanced economies, studies focused on selected developing countries like India are relatively scarce. A handful of studies such as Jha (2003), Singhania and Gupta (2011), Wang (2012), Dua and Garg (2015) A small but growing set of studies have departed from the aggregate focus on India as a whole and factored in the regional inequality in distribution of FDI inflows into India. Mukherjee (2011) for example focuses on the regional inequality in the FDI flows to India and finds a positive association of FDI inflows to a particular region with the region's market size, agglomeration effects and size of its manufacturing and services base.…”

Determinants of Foreign Direct Investment in Middle-Income Countries: New Middle-Income Trap Evidence

“…(Asiedu, 2002;World Bank 2008;Griffith 2011). 8 The variable Trade Openness is commonly measured as the sum of export and import divided by GDP (Ezeoha and Cattaneo, 2012;Seim, 2009;Singhania and Gupta, 2011).…”