An empirical study of determinants of foreign direct investment (FDI) in India

The present study tries to examine the determinants of Foreign Direct Investments (FDI)) inflows in India. We consider several macro-economic variables such as stock market, foreign exchange rate, index of industrial production (IIP), foreign institutional net investment (FIIs), gross domestic product (IIP) and foreign exchange reserves for the period April 1993 to March 2010 and try to make a link between these variables and FDI inflows by using correlation and multiple regression analysis. Empirical findings reveal that FDI inflows depend on stock market, IIP and GDP performance and FIIs net investment. On the other hand exchange rate and foreign exchange reserves do not appear to have any significant effect on FDI inflows in India.