Potential and Performance of FDI Inflows In India
In the midst of era marked by globalisation, FDI is observed as a main driver of growth and development for all developing countries. India has been a recipient of substantial FDI inflows in recent years and has emerged as the fastest growing investment destination for foreign investors. This paper attempts to explore and highlight various factors that play critical role in determining the potential of FDI in India and then critically view the performance of FDI by analysing the trends in FDI over 1970 2016. The paper employs Principal Component Analysis PCA technique to construct an FDI potential index to assess the potentiality of India to draw in FDI. This index comprises of human capital, infrastructure, RandD base and external trade and has been constructed for 1970 2016 to study the relation between FDI potential and FDI performance in India One key observation is a unique similarity in trends of all selected indicators for the above variables determining FDI potential index. Secondly, the FDI potential index is continuously rising in the given time period and exhibits a steep rise after 2010 showing that India is increasingly becoming the destination for all foreign investors in recent times. Lastly, the FDI potential index and FDI performance are highly significantly correlated.
globalisation, Principal Component Analysis, human capital, RandD base, infrastructure
Vishruti Gupta | Pooja Sharma | Vrinda Gupta