Determinants of Foreign Direct Investment: Empirical evidence from India
DOI:
https://doi.org/10.1956/jge.v10i1.312Keywords:
Exchange rate, Foreign Direct Investment, market size, total reserves.Abstract
Abstract: India received, over the past two decades substantial amount of Foreign Direct Investment (FDI) inflows. The purpose of this study is to empirically investigate the determinants of FDI inflows in India using time series data for the period 2001-02 to 2011-12. In the analysis, FDI inflows are modeled as a function of market size, total reserves, degree of openness for the host country, exchange rate and lastly expenditure of the central government on economic and social activities. The empirical study observed that market size and availability of foreign exchange reserves are the two main factors that determine the inflow of FDI over the study period. Despite the theoretically expected sign, estimated coefficient of the variable exchange rate bears a positive sign. And variables like Openness and the expenditure of the central government on social and economic activities do not explained the inflow of FDI during the period.
Keywords: Exchange rate, Foreign Direct Investment, market size, total reserves.
Â
Â
References
1. Goel, S., Kumar, P. & Rao, K. S. (2012). “Trends and Patterns of FDI in India and its economic growth.†Asian Journal of Research in Business Economics and Management, Vol. 2, No. 4, pp. 130-144.
2. Janicki, H. P. & Wunnava, P. V. (2004). “Determinants of foreign direct investment: empirical evidence from EU accession candidates.†Applied Economics. Vol. 36, No. 5, pp.505-509.
3. Khachoo, Ab. Q. & Khan, M. I.(2012). “Determinants of FDI inflows to developing countries: a panel data analysis.†MPRA, Paper No. 37278.
4. Shamsuddin, A.F. M. (1994). “Economic Determinants of FDI in Less Developed Countries.†The Pakistan Development Review. Vol. 33, No. 1, pp. 41-51.
5. Tosompark, C.T. & Daly, K. (2010). “The Determinants of FDI inflows – Recent evidence from Thailand.†Working Paper, University of Western Sydney.
6. Tsen, W. H. (2005). “The Determinants of Foreign Direct Investment in the manufacturing industry of Malayasia.†Journal of Economic Cooperation. Vol. 26, No. 2, pp. 91-110.
7. World Investment Report 2012, UNCTAD.