Is India’s reluctance to join the Belt and Road Initiative a missing opportunity? Synthetic Control Method Analysis.

Abstract

Eight years have passed since the launch of the Belt and Road Initiative (BRI) in 2013 which was put into action in 2014. Since then, a series of research papers have categorized their findings in relation to the initiative’s aims, targets, and estimations of possible outcomes. This research intends to measure the impact of India’s resilience to join this initiative on its net foreign direct investment by comparing its trajectory to the trajectory of the same outcome for a counterfactual unit of comparison from countries that have joined the initiative. The method that will be employed is the Synthetic control method (SCM) for a panel of 27 countries between 1990 to 2021. The empirical results show that the net Foreign Direct Investment FDI trajectory for India during the eight years from 2014 to 2021 has fallen compared to synthetic India constructed from BRI member countries. This research study is distinctive from other empirical contributions by using an inventive technique of SCM, which is a new experimental method to assess actual outcomes rather than predicting them, as in other conventional regression models. Moreover, the economic aspect of accessing the BRI has rarely been investigated, since most studies have qualitatively focused on the political aspect of the initiative. The results can assist in decision-making for India and other countries considering membership in this millennium initiative.