Title: A study on the impact of FDI policy and the foreign exchange management in India

Authors: R. Venkataraman; Thilak Venkatesan

Addresses: Presidency College, Kempapura, Hebbal, Bangalore – 560024, Karnataka, India ' Bharathiar University, Marudhamalai Road, Coimbatore, Tamil Nadu 641046, India

Abstract: Foreign exchange management is crucial for all developing countries like India. A floating exchange is more dynamic as it would have an unembellished effect on the importers or exporters. Prior studies indicate that FDI has a significant impact on the exchange rate and augment the government initiatives of opening or attracting higher FDI into India. On the other hand, the sectors opened also should provide adequate returns justifying the investment. In this regard, the paper attempts to study the FDI flows in various sectors, their profitability, and the impact of FDI flows on the exchange rate. Various theories augment the fact that a higher inflow of foreign capital would aid in appreciating the rupee. Secondary data sources and seemingly unrelated regression was used to analyse foreign flows and currency appreciation. The automobiles sector was observed a significant effect on the exchange rate. 21 sectors were explored for policy implications.

Keywords: fiscal policy; foreign direct investments; foreign exchange management; sector performance; panel data; India.

DOI: 10.1504/IJPSPM.2019.101090

International Journal of Public Sector Performance Management, 2019 Vol.5 No.3/4, pp.531 - 543

Accepted: 08 Apr 2019
Published online: 05 Jul 2019 *

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