DYNAMICS OF FDI INFLOWS IN INDIA: AN APPLICATION OF ARDL AND FMOLS
Arnob Paul and Sushanta Kumar Nayak
Article
Foreign Direct Investment (FDI) plays an important role in the development of the countries. It helps the capital deficient countries to meet their capital requirement for the development by allowing the Multinational companies (MNCs) of the other countries to set up their production units in the host nation. In other words, foreign capital bridges the gap between the domestic saving and investment. In India, during 2010, the total FDI inflow was around Rs. 96014.96 Crore which has increased to Rs. 311643.97 Crore in 2016 and further to Rs. 478603.88 Crore in 2020; it signifies that the FDI inflow in India has increased by more than 53 per cent within this one decade (2010-2020). The present study is conducted with the broad objectives (1) to analyse the trend of FDI inflows in India at sectoral level, and (2) to know the determinants of FDI inflow to India. The study is conducted for the year 1980 to 2021. For the study, the time-series data has been used which is collected from various sources like RBI Databank, World Bank Databank, and OECD Databank. The result of the study shows that no significant structural change is observed in the part of industry level FDI inflow. Further, the result suggests that the Gross Domestic Product (GDP), Trade Openness and Inflation rate are the important factors in determining the FDI inflow in in India
Keywords
Foreign direct investment inflows, Economic growth, Autoregressive Distributive Lag (ARDL) Model, Error correction, Fully modified ordinary least square, India