Capital inflow and Indian economy in post SAP period an empirical analysis

FDI and FIIs has played a significant role in the growth and development of Indian economy. The paces of FDI and FIIs inflow in India initially were low due to regulatory policy framework but there is a sharp rise in investment flow in post SAP period because of new economy policy has been adopted. GDP is a leading economic indicator. So this present study tries to examine the impact of FDI, FIIs and GDP on BSE Sensex. Stock market is also an economic barometer. This paper also tries to see the changes are significant in these macro-economic variables during pre SAP period and also in post SAP period. This study tries to make a link between these variables and BSE Sensex by using correlation and multiple regression analysis. Empirical findings reveal that there is significant change in FDI in pre and post SAP period. There is also a significant change in FIIs in post SAP period and there is no significant change in GDP in post SAP period. There is highly and strong positive correlation between sensex and FDI. FDI also have significant impact on sensex There is moderately and positive correlation between FIIs and sensex, but FIIs have not significant impact on sensex. GDP and sensex are also positively correlated but have not significant impact on sensex.