Title: Determinants of inward foreign direct investment in India - a factor analysis approach

Authors: J.C. Sharmiladevi

Addresses: Symbiosis Centre for Management Studies, Symbiosis International University, Viman Nagar, Pune, India

Abstract: Foreign direct investment (FDI) is widely perceived as an important resource for expediting development. Many factors play significantly in influencing the amount of FDI. The objective of this study is to analyse the various factors which influence and determine FDI inflows into India and spot those determinants. Variables examined includes, net FDI inflow, labour cost proxied by workers' remittances and receipts, urbanisation measured by population in large cities, inflation measured from GDP deflator, human capital measured through gross enrolment in secondary schools, trade, official exchange rate and gross domestic product expressed as a percentage of FDI. Factor analysis is used for identifying and grouping of variables. Based on principal component analysis and varimax with Kaiser normalisation, two common factors identified. Regression identifies the power of the two variables in influencing inward FDI. Results of regression indicate that internal economic conditions and external economic conditions together explain 91.80 percentage of inward FDI.

Keywords: foreign direct investment; FDI; factor analysis; regression analysis; India; determinants.

DOI: 10.1504/IJPSPM.2019.101067

International Journal of Public Sector Performance Management, 2019 Vol.5 No.3/4, pp.306 - 320

Received: 02 Mar 2018
Accepted: 04 Aug 2018

Published online: 05 Jul 2019 *

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