Abstract
In this chapter, the author explains the trend lines, random walk, stationary, structural breaks, and volatility of FDI inflows in India during 1971-2015. Both log linear and exponential trends are significant. FDI inflows are stationary and showed four structural breaks in 1985, 1994, 2000, and 2006. The author found the relation among FDI inflows, growth rate, interest rate, inflation rate, exchange rate, fiscal deficit, external debt, and trade openness with the help of Granger causality, Johansen cointegration test, and vector error correction models. Trace statistic has four cointegrating equations, and Max Eigen statistic has three cointegrating equations. The speed of the vector error correction process is more or less slow except for change in interest rate and change in inflation rate, which are significant where VECM is stable and diverging. Limitations and future scope of research is added. Policy recommendations are also included.
TopObjective Of The Study
In this paper, the author endeavors to explain the patterns of behavior of India’s foreign direct investment inflows during 1971-2015. Besides, the author tries to relate FDI inflows with macro variables like growth rate, interest rate, inflation rate, exchange rate, fiscal deficit, external trade and trade openness of India during the specified period with the help of causality, cointegration and vector error correction models.