An Analysis of Relationship between Foreign Investment and Major Indian Economy Indicators

The foreign investment such as direct and institutional flows has massive contribution to influence the economic performance of the countries. The increase in flow of Foreign Direct Investment and Foreign Institutional investment has earmarked the growth of developing countries. The study attempts to examine the relationship of foreign investment and macroeconomic indicators of India. By using monthly time series data, we found that Foreign Direct Investment (FDI) is establishing relationship with many economic indicators like with Inflation Rate, Money supply, Wholesale Price Index, Exchange Rate, Interest Rate, Index of Industrial Production, Balance of Trade in both ways i.e. positively and negatively, while Foreign Institutional Investment (FII) is able to establish relationship with few indicators only i.e. Money Supply, Exchange Rate & Balance of Trade. The time series data between 1996 to December 2015 has been used.