Impact of exchange rate volatility on foreign direct investment in India: An empirical analysis

The purpose of the study was to determine the impact of Exchange Rate volatility on Foreign Direct Investment (FDI) flows.FDI plays an extra ordinary and growing role in global business. It can provide a firm with new market, marketing channels and growing role in global business.FDI is considered to be the life blood for developing nation. It helps in broaden the market accessibility for host and home countries.This researchpaper aim at exploring the impact of Exchange Rate movements (NEER) on the stream of FDI in India. There are large numbers of FDI determinants but the Exchange Rate is one of reflective determinant. In order to analyse the relationship between Exchange Rate and FDI in India, various econometric models can be used, which is based on the monthly data onFDI and Exchange Rate from April 1995 to March 2018.The Auto Regressive Distributed Lag (ARDL) model was applied to estimate the impact of volatility of Exchange Rate on FDI flows in India. Empirical findings revealed that in both short and long-run, Exchange Rate volatility has significant negative impact on FDI flow in India. In short the currency depreciation of host country leadsto increase FDI flows into that country.