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Determinants of Foreign Direct Investment: Empirical evidence from India

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  • Shamurailatpam Sofia Devi

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.

Suggested Citation

  • Shamurailatpam Sofia Devi, 2014. "Determinants of Foreign Direct Investment: Empirical evidence from India," Journal of Global Economy, Research Centre for Social Sciences,Mumbai, India, vol. 10(1), pages 16-23, March.
    • Handle: RePEc:jge:journl:1012
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    More about this item

    Keywords

    Exchange rate; Foreign Direct Investment; market size; total reserves; India;
    All these keywords.

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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