Revisiting the Determinants of Foreign Direct Investment in India

Yew, Hao Yee (2021) Revisiting the Determinants of Foreign Direct Investment in India. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Foreign direct investment (FDI) is a vital tool for a country’s development, specifically those in developing countries, because these countries have no sufficient capital, access to modern technology as well as other factors. According to past studies, most of the researchers pointed out that FDI does contribute to a country’s economic growth. In order to encourage FDI to enter the initial stage, the Indian government has adopted several measures, comprising the Foreign Exchange Regulation Act 1973 (FERA), which gave Reserve Bank of India (RBI) the power to become a statutory regulatory agency. As time goes by, in order to better manage, Government of India implemented the "Foreign Exchange Management Act 1999" (FEMA). Next, the Department for Promotion of Industry and Internal Trade (DPIIT) focuses on controlling the FDI entry into the country by promulgating the "Consolidated Foreign Direct Investment Policy", which sets the limits for investors from abroad to invest in different areas of the economy. The aim of this research is to examine the determinants of foreign direct investment in India by employing time series data from the year 1988 to the year 2017 with the variables of market size, trade openness as well as exchange rates.