Determinants for FDI flow in India

Determinants for FDI Inflow in India Under the guidance of Dr. Sanjeev Prashar

Section-A Mayank Garg(11DCP026) Anurag Prashant(11DCP013) Farid Ashraf(11DCP019) Prashant Gupta(11DCP035)

........................... 7 PROBLEM DEFINED..................................................................... 12 LIMITATIONS OF RESEARCH .................................................................................................................................................................................................................... 11 SCOPE ........................................................................................... 18 REFERENCES ......... 6 LITERATURE REVIEW: ................................................................................................................................................................................................................................................................................................................................................................. 12 DATA AND MODELS ........................... 13 CONCLUSION: ....................................................... 11 RESEARCH METHODOLOGY ............................................ 10 OBJECTIVES ..................................................................................................................................................... 4 PREFACE ........................... 5 ABSTRACT......................................................................................Determinants for FDI flow in India Contents FOREWORD . 10 SIGNIFICANCE ................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................. 19 .................................................................................................................................................................. 6 INTRODUCTION ............... 6 PROJECT OVERVIEW: ................................

And above all. who have been unselfish in extending their efforts and word of advice. support and constant encouragement duration of the study. To our friends.Determinants for FDI flow in India ACKNOWLEDGEMENT The researchers wish to express their deepest gratitude and warmest appreciation to the following people. who never cease in loving us and for the continued guidance and protection. the researchers are thankful to the Almighty God. The Researchers . Prashar for his guidance. To Dr. who have inspired and have contributed in any way to the overall success of the undertaking.

No sooner did we realise the importance of polity. Even though the countries had their own growth story.Determinants for FDI flow in India FOREWORD "I need the money" said an embattled finance minister Shri Pranab Mukherjee as he batted in favour of bringing the FDI in multi brand retail against the cacophony of opposition. the factors which contributed to MNC's choosing to plough their money in our economy. Hence we decided that since our economy had a long way to go. . The criticality of certain factors have taken precedence as the size of economy has grown and become more visible. we also realised that a factor like this was extremely complex and dynamic in nature. It struck upon the researchers that there would surely be factors of equal if not more importance which would be critical in nature which could help bring FDI in India which is facing sluggish growth even though it still maintains its status as the second fastest growing economy in the world. More than 2 decades have elapsed since the Indian economy was opened and thus began a remarkable phase of growth and outreach of the indian entrepreneur. we would carry out a research determining as to what parameter could play a deciding role in bringing the valuable foreign exchange to India. the factors have evolved as well. But they were the policy decisions of those times and as change is the only constant. we engaged in a thorough study of the growth of some of the fastest developing economies(China) and other developed Asian bellwethers (Japan and South Korea). we realised the importance of political stability and consensus among different parties as a critical factor in deciding on major policy decisions like inflow of FDI across different sectors. As the debate raged in the hallowed space of the Indian Parliament. some commonalities emerged strong and we found that influx of FDI had played a major role in the development of these countries. As a prelude to deciding the topic for research . Such a consequence was not measurable in nature yet its importance could not be stated enough.

An understanding of FDI as an important factor that influence economic sustainability will help them in proper understanding of the need for it in a growing economy like India. Sincere acknowledgment is here made to those who helped these researchers gather data for this research paper.Determinants for FDI flow in India PREFACE This paper presents the role that FDI Inflows play in economic development of Indian economy and the related factors. This work would not have reached its present form had it not been their invaluable help. . who play an increasingly important role in the growth and development of the opinions. It shows how different quantifiable factors affect the variation of FDI Inflows with the help of principles of econometric and its varied applications. This research paper is primarily addressed to academicians.

But it is still far off from fulfilling the appetite of a country with more than a billion strong consumer base. foreign firms tend to locate in developing . capital flow to developing from developed countries has increased substantially. INTRODUCTION Capital flows to India have grown substantially since the early 1990s. The first set of factors are the Quantifiable factors like: Forex reserve. Broadly. The period encompasses a significant transition from a surging economy to the gloom of the recession and then green shoots of recovery that emerged post recession. PROJECT OVERVIEW: The broad objective of this study is to evaluate factors that are encouraging to FDI flows in India. Openness of the economic policies. Capital flows to developing countries have grown substantially since the early 1990s. Prosperity. The aim of the research is to analyse the various potential determinants(Both quantifiable and Unquantifiable) of FDI for India. GDP. From an inflow of $165 million in the fiscal year ending 1992 to a staggering $27024 million in fiscal ending march 2011. Fiscal deficit.Determinants for FDI flow in India ABSTRACT Foreign direct investment is a major stimulus to economic growth in developing countries. The volume of FDI that flows into India is growing as a share of total global FDI flows. Notable feature is its being ranked 3rd by E&Y as among the most attractive destinations for FDI’s in 2010. The time frame for analysis is a 4-year period. Binding on investment by law. the determinants of FDI can be bifurcated divided into 2 different sets. Underlying this surge in inflows has been a slowdown in economic activity in the developed countries. Indian economy is resemblance of an economy studded with foreign investment and foreign policies with deregulation playing a pivotal role. There have been numerous studies in the past which have clearly stated the beneficial aspects of FDI inflow in a country. Bilateral relation between the nations. and a parallel improvement in the economic prospects of recipient developing countries. we examine the relative significance of key economic determinants of foreign direct investment FDI using multiple regression. India's share is on a steady upward trend for the last few years. Index for Industrial production(IIP). with selected Asian and Latin American countries receiving capital from developed countries in a large scale. 2007-2010. post liberalization India has witnessed a mammoth increase in FDI in 2 decades. Inflation and second set of factors include unquantifiable factors like: Political stability. Traditionally. In the last few years. Balance of Payment(BOP).

openness. and skills. Moreover. study aims to develop a trend and factors influencing FDI. Foreign direct investments (or the FDI) are principally driven by the difference in prices of factors of production and the size of national market. the ability of the host country to use these resources and generate growth successfully depends majorly upon its policies. This literature review draws from the past studies conducted in the same area and provides an explorative view of the relationship that exists between FDI inflows and its determinants. Study can be conducted either on demand side factors such as market size. Foreign capital can be used to augment domestic savings (which is usually at the low level) and thus enable countries to increase the rates of capital accumulation. infrastructure and political stability which are unquantifiable in nature or on the basis of supply side factors like inflation. The time period of study is from 2007 to current. drive the flow of FDI into South Asia and found that economic freedom. human capital. Foreign investors move their production process to the developing countries aiming to reap advantages of cheaper factors of production and their strategy is delocalization of low-skilled production stages towards low-wage countries. . Bosworth and Collins (1999) argued in their literature that the ability to attract international capital can offer large potential benefits for developing countries. Shaukat Ali and Wei Gu (2005) suggest that if a country does not have the resources like requisite technology. forex reserves and GDP growth which are quantifiable and data is readily available. To start with. IIP. either economic or non-economic. Foreign direct investment is more conducive to long-run growth and development than other forms of capital inflows. Quazi and Mahmud (2004) investigated that which factors. incentives. and lagged FDI significantly increase FDI inflow into South Asia. this improves long term growth prospects and increases wealth of the population. resource and market seeking objectives. However. LITERATURE REVIEW: Numerous studies have been done to find the determinants of FDI. resource pool and stable encouraging political & economical policies are the main factors which attract FDIs. prosperity. in other words. while political instability depresses it. Consequently.Determinants for FDI flow in India nations with one or more of these intentions in mind: efficiency. the same can be provided by FDI through the spill over effect. Cheap workforce. speeds up the development process.

increased competition in local markets. The inflow of FDI accompanied by new knowledge may benefit domestic firms through imitation and learning. They further establish that FDI inflow is not only affected by tangible factors like interest rates. foreign firms locate in developing countries with one or more of these intentions in mind: resource. Foreign direct investment (FDI) is one of the most effective ways by which transition economies become integrated to the global economy as FDI provides not only capital but also technology and management know-how necessary for restructuring firms in the host economies. which can then be adapted by the host country in other contexts. The more open the economy policies. During the late 1990’s Malaysia experienced annual growth of around 9% which in part is attributed to massive FDI flows that played a significant role in pushing the Malaysian economy forward. and vertical linkages.Determinants for FDI flow in India James P. efficiency or market-seeking objectives. Seetanah Boopen. Walsh and Jiangyan Yu (2010) argue that FDI brings with it foreign technology and management skills. FDI is generally accepted as a means of incorporating new knowledge from abroad. thereby increasing the productivity level and sustaining a higher growth rate. Markusen (2002). In addition to providing new capital. For a mining firm. Traditionally. The abundance of natural resources has a positive impact on FDI inflow. and poor development indicators among prospective workers. Rojid Sawkut. for example. the availability of natural resources is the key reason to invest in a particular country. Therefore. and that investors are also concerned about political instability. inflexible regulations. . the more the positive benefits of FDI to the host country. inflation rate but also on some intangible factors like stable economic conditions and strong institutions. the resource-seeking objective is paramount for such firms. Ramessur-Seenarain Taruna & Sannassee Vinesh (2007) further argue that openness of economic policies has a positive impact on FDI inflow and is in line with the fact that openness of economic policies create a positive environment which is likely to attract foreign firms. facilitation of human capital mobility among firms. Studies conducted in Malaysia by Marial and Ngie (2009) prove that FDI not only helps in the growth of the economy but it is also an important vehicle and indicator of the country’s degree of economic globalization and integration into world economy. In terms of the efficiency-seeking objective it goes beyond the natural resource pull of countries.

while the signs of other variables (exchange rate appreciation) were plausible – the only exception being the corporate tax rate and inflation rate. The external debt burden is like a disincentive for FDI as found with negative relationship between this variable and FDI inflow.Determinants for FDI flow in India Nunnenkamp and Spatz (2004) argue that from a development perspective. But FDI does not necessarily induce economic growth. A study was conducted using China as an example to demonstrate the same. . This proves that FDI doesn't always contributes towards the growth of the host country. (b) social or cultural factors. Owen C. China is one of the largest developing economies in the world with one of the highest FDI inflows. openness. applying different strategies and experiencing dramatically different outcomes Dunning’s (1977) location advantage theory helps to identify important variables that influence FDI flow using three main categories: (a) economic. and are protected from international competition. wage rate growth. H. interest rate) had the expected signs. may not use the latest technology. Firstly. The variables included were not significant in the time period when the investment was made. and (c) the political environment. The empirical result revealed that the most important economic variable found were market size that shows a country’s development levels permit the exploitation of economies of scale which is likely to increase the attractiveness of FDI vis-à-vis alternative forms of internalization. strong export orientation and substantial integration in the supply chain of the multinational enterprise. developing countries might be better off if they attract efficiency-seeking FDI in the form of full-scale plants with cutting-edge technology and management practices. A number of centrally planned economies set out to implement economic and political reforms. As mentioned by Isabel Faeth (2005) most of the variables included (GDP growth. which is consistent with the widely accepted belief that growing market size creates an incentive for foreign investors to gain market access. but were significant for up to five lags. Ho (2004) finds that though there is strong co-relation between GDP growth and FDI inflow. Two points of interest emerged from this estimation. job vacancies. Such investments offer higher developmental benefits than FDI in the form of sub-scale plants that produce for the local market. the model shows that FDI decisions (unlike portfolio investment decisions) are predominantly driven by longer term considerations.

PROBLEM DEFINED There is generally a positive attitude towards FDI because of the potential benefits from the spill-over of technologies and skills. Though a lot of researches have been done to find the determinants for FDI flow. While India has allowed free . which highlights the role of inclusive policies to promote growth and development and avoid sudden withdrawal of FDI inflows. Rajan . trade liberalization led to reduced restrictions on foreign investment and expanded the scope for FDI in most sectors. focus of South Asian Countries towards market reforms. lower political risk. adopting fixed or managed exchange rate policies and have played an important role for FDI inflows. Therefore. portfolio investment. Eliminating FDI related capital controls. Investments in the FDI are less likely to move out in a short span during financial crisis as compared to other forms of foreign investment such as Foreign Institution Investment. and Domestic conflict events are found to have significant negative effects on FDI. Elif Arbatli (August 2011) finds the role of external factors and of political stability of the host country in the flows of FDI in Emerging Market Economies.Determinants for FDI flow in India Pravakar Sahoo November (2006) finds that market size. Ramkishen S. Political instability. Also. labour force growth. So what are the determinants for the flow of FDI. and lower corporate tax rate in the host country are among the factors that appeal and facilitate bilateral intra-ASEAN FDI flows. The sizes. OBJECTIVES In the following research paper we shall closely examine the factors which assist and those which prove to be a bottleneck in the inflow of FDI in India. and Shandre Thangaveluexplain (January 2008 ) finds the drivers of intra-ASEAN FDI flows using bilateral FDI flows between host and source ASEAN countries. lowering of corporate tax rates and trade tariffs. but no study has been conducted to find the determinants for a particular sector. Also. a shorter distance between countries tends to facilitate bilateral FDI flows. Rabin Hattari. This research aims to establish the dependency of different determinants on FDI. The study has been done for the period of 4 years starting from 2007 to 2010. infrastructure index and trade openness are the major & influential factors for determinants of FDI in South Asia. which encompasses a significant transition from a surging economy to the gloom of the recession and then green shoots of recovery that emerged post recession.

logistics. global technology standards. Important macroeconomic parameters are established through a thorough study of literature regarding the same on parallel economies in their stages of growth. multiple regression will be employed to estimate the relationship between different determinants and the FDI. infrastructure etc expected in the foreseeable future. These parameters include the inflation rates in an economy. GDP growth rate. vested interests and powerful lobbies along with global factors like the effect of global downturn. political indecisiveness. Also included are the balance of payments which highlight the direction of trade. such as GDP. insurance. India’s image as an investment hub and competition vis-a-vis China as indicators as well as determinants whether the dollar inflows are maintained SIGNIFICANCE In the past decade. Balance of Payments. it has critically regulated FDI in other crucial sectors. We will use secondary data. The research conducted will be carried out in 2 parts: . India has become an increasingly important hosting economy for FDI and this trend is expected to continue with the country’s entry to the World Trade organization. The data collected for the research includes the pre recession. RESEARCH METHODOLOGY With major policy changes regarding FDI in retail. Interest rate. Factors may vary as a matter of perspective from the policy side and from the viewpoint of the investor.Determinants for FDI flow in India flow FDI in some sectors. banking. The purpose of this paper is to empirically examine the foreign direct investment (FDI) in India. The Government of India is expected to facilitate the smooth rolling in of foreign investment. the recession stage and the recovery stage of the global economy and hence a time frame from 2007 onwards has been chosen for the study. Inflation rate. In our paper we shall examine certain domestic factors such as infrastructure crunch. Index for industrial production which measures the improvement in the manufacturing capabilities of the country and also the improvement in technological levels. This is followed by an application of factor analysis to examine the variables and factors influencing the FDI in India. the fiscal deficit maintained by the government which has proven to have a bearing on the inflation rates in the economy. Fiscal deficit and others.

For establishing the veracity of the data before carrying out the factor analysis. The period encompasses a significant transition from a surging economy to the gloom of the recession and then green shoots of recovery that emerged post recession LIMITATIONS OF RESEARCH 1) Factors like political stability. A value of above . Balance of Payment (BOP). Index of Industrial Production (IIP). GDP growth rate & Forex Reserve taken from literature. are not quantifiable in nature. 4) Economy of India has bypassed the manufacturing stage and directly become service oriented economy. 5) Due to inadequacy of statistical data. This distorts the cyclicity that an economy is supposed to follow per say. 2) The second stage of the research involves multi stage regression which used to ascertain the correlation and weight age of the factors included in a particular category obtained by factor analysis. The data used for research has the month wise value of the aforementioned parameters. hence these have not been covered under the purview of the study. 3) The research is focused on the factors contributing to the inflow of FDI till current date and cannot to be used to project factors that may influence future inflow.Determinants for FDI flow in India 1) The first part involves establishing the variability of the factors with respect to the FDI inflows using the factor analysis tool in SPSS. This introduces a scope for error in the research results. Fiscal Deficit. The study has been done for the period of 4 years starting from 2007 to 2010. the KMO and Bartlett’s test are conducted. Thus we can obtain a certain amount of accuracy regarding the variability in the inflows of FDI in India when these factors are subjected to sharp changes. we could not cover Interest rate which is an important factor affecting the FDI inflow into any country. 2) The period encompassed in the study is that of a recessionary phase and growth post it. . relations between governments etc. SCOPE The study is being carried out to identify major determinants of FDI inflows in India influencing the growth of the country in terms of macroeconomic variables such as inflation.665 is required to affirm the measure of sampling adequacy. Hence the research paper covers a turbulent time in global economy.

binding on investment by laws. openness of policies. multiple regression was conducted for determining the dependency between yearly FDI and factors selected. Factors.Determinants for FDI flow in India DATA AND MODELS FDI inflows. prosperity. the team decided to narrow down on the following statistically determined quantifiable factors. IIP.678 Bartlett’s test. For instance. it was proved that all the factors chosen are indeed liable to be selected as factors affecting and determining FDI inflow. All the factors chosen were passed through factor analysis with data from 2007-2011 and it cleared the minimum criteria of 0. is widely and deeply affected by a number of varied factors. . one thing needs to be noted. BOP etc. Upon conducting the analysis. On the other hand there are some statistically determined factors which have again impacted FDI inflows from time to time like external debt. “Aseidu (2002). After finalising on these factors. GDP growth rate. dependency of FDI on these factors have kept changing over the period of time in every country. Factors may also be categorised as economic or non economic factors as well. Thus we started on an open note regarding the formation of a factor basket from which a few factors have been filtered by the factor analysis. and Ioannatos (2003) found positive relationship between trade openness and FDI inflows” while “Chakrabarti (2003) found negative significant relationship between taxes and FDI inflows”. While on one hand we have unquantifiable or abstract factors like political stability. construed to be one of the most important growth indicators of an developing economy. After a careful study of previously done researches on the same topic. Forex reserve.  Forex reserve  BOP  GDP growth rate  Fiscal Deficit  Inflation rate  IIP and used SPSS’s factor analysis for determining whether our hypothesis holds true or not. both quantifiable and unquantifiable have been in existence for eons. mutual relations between the two countries etc. However.

Determinants for FDI flow in India .

establishing the fact that fiscal deficit is a repellent to FDI. it felicitates government to borrow less for reducing debt and it allows that much flexibility for flexing its investing options. investors see promise in future growth of economy and are attracted for making investments. FDI vs Forex Reserve: economic analysts are always hopeful for increase in Forex reserves and FDI is one of the strong tool for it. which in-turn attracts foreign investment. Also it leads to appreciation in foreign currency. . With strong growth prospects and trend. it becomes an attractive option of investment both for Indian & Foreign investors. which is infact true if previously held researches are taken into consideration.6 in Dec’10. The index has grown from 134 in Jan’07 to 175. a measure of growth in various sectors in Indian economy like manufacturing. FDI vs GDP Growth Rate: with a promising and sustainable GDP growth rate.e.Determinants for FDI flow in India FDI & BOP: regression test gives a negative coefficient for BOP vs FDI. Economies with less fiscal deficit have higher FDI inflow as compared to those with high fiscal deficit. FDI vs IIP: IIP refers to Index Industrial Production. FDI vs Fiscal Deficit: test again shows a negative correlation between the two. white goods etc. Both are positively correlated. A strong correlation is demonstrated between the two confirming the notion. thus reducing the marginal cost of investment. cost of investment increase i. Earlier the base year for measuring of index IIP was ’93-’94 but was later changed to ’04-’05. cost of manufacturing and commodity increases. Analysis demonstrates a positive dependency coefficient between the two supported by the data. a fact seconded by our analysis. FDI vs Inflation: with increase in inflation. With low BOP.

Determinants for FDI flow in India 18 16 14 12 10 8 6 4 2 0 20000 40000 60000 80000 0 -80000 -60000 -40000 -20000 Fiscal Deficit Inflation Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 Fiscal Deficit Inflation .

10 12 200 180 160 140 120 100 80 60 40 20 0 0 Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 2 4 6 8 Determinants for FDI flow in India 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 IIP GDP Growth July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 Forex Reserves Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 IIP GDP Growth Forex Reserves .

IIP and Forex reserve and Component 2 include Balance of payment and GDP growth. Fiscal deficit. Inflation. The variables grouped into one component are closely correlated among themselves. Fiscal .154% of the variance while component 2 contributes for the 17. Balance of payment.670 which proves the correctness of the research. Further KMO and Bartlett's Test gives the Eigen value of . Factor analysis yields two components: Component 1 include factors like Fiscal deficit. which will help India to formulate its policies for attracting FDI & maximizing the benefits in favour of the country.935% of the variance. Component 1 contribute to the 53. Factor Analysis technique was applied to the selected six independent variables: Inflation. but not so closely correlated with variables grouped into different components. Forex reserves. IIP and Forex reserve are important in explaining the change in FDI Inflows. Forex Reserve & IIP have a strong positive impact in attracting FDI inflows in India. Further regression analysis establishes that GDP Growth. This research offers additional evidence on the relative significance of key economic factors and their influence on FDI inflow. Factor analysis is used to identify the significant factors that explain most of the variance observed in a much larger number of variables.Determinants for FDI flow in India BOP 150000 100000 50000 BOP 0 -50000 -100000 Jan 2007 March 2007 May 2007 July 2007 September 2007 November 2007 Jan 2008 March 2008 May 2008 July 2008 September 2008 November 2008 Jan 2009 March 2009 May 2009 July 2009 September 2009 November 2009 Jan 2010 March 2010 May 2010 July 2010 September 2010 November 2010 CONCLUSION: In this study determinants for the flow of FDI in India were examined for the period from 2007 to 2010. Fiscal deficit. and IIP. whereas Balance of Payment (BOP). We found out that Inflation. A factor analysis was conducted to find the factors or variables that explain the correlations within the set of observed variables. GDP growth rate.

Rajan2. Finance And Economics Department At University Of Technology Mauritius. Ramkishen S. Hwwi Research Programme World Economy. And Shandre Thangavelu: "Understanding Intra-Asean Fdi Flows Trends And Determinants". Shaukat Ali And Wei Guo::"Determinants Of Fdi In China". Imf Working Paper Asia Pacific Department. REFERENCES Isabel Faeth. 2 Euroframe Conference On Economic Policy Issues In The European Union. Yuko Kinoshita And Nauro F. Campos:"Why Does Fdi Go Where It Goes? New Evidence From The Transition Economies". The University Of Melbourne Department Of Economics. Volume 1. Journal Of Global Business And Technology. Robert Osei: "The Characteristics And Determinants Of Fdi In Ghana". Amitendu Palit Shounkie Nawani: "Technological Capability As A Determinant Of Fdi Inflows: Evidence From Developing Asia & India". "Determinants Of Fdi In Australia: Which Theory Can Explain It Best?". Rabin Hattari1. Number 2. Fabian Barthel. Walsh And Jiangyan Yu: "Determinants Of Foreign Direct Investment: A Sectoral And Institutional Approach". Ramessur-Seenarain Taruna & Sannassee Vinesh: "Determinants Of Fdi: Lessons From African Economies". The Indian government can use this research as a reference to form its policies to attract FDI into India. . The result is in accordance with the literature and previous research conducted. Rojid Sawkut. Indian Council For Research On International Economic Relations. The FDI inflow has played key role in increasing the economic development.Determinants for FDI flow in India Deficit and Inflation have an adverse effect on FDI inflows. James P. Seetanah Boopen. Department Of Economics And Finance Tennessee State University. The research concludes that FDI flow is not dependent on any single factor but it depends upon myriad of factors. Valerija Botric And Lorena Skuflic: "Main Determinants Of Foreign Direct Investment In nd The South East European Countries". Dharmendra Dhakal: "Foreign Direct Investment And Economic Growth In Asia". William Davidson Institute Working Paper Number 573. Fall 2000. Matthias Busse.

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