Effects of Economic Growth and Exports on FDI Inflow: Pre and Post Liberalization Analysis of Economic Reforms in India.

Abstract

This paper is an attempt to present the effects of the economic growth and exports on FDI inflow of one of the major developing countries of Asia i.e. India. There are many internal and external factors which influence FDI inflow in any country. The economic growth and export of an economy are few of them. Foreign Direct Investment helps in capital investment to a lot of firms, helps in generation of new technologies. It also generates employment opportunities & helps in gaining competitive advantage through investing the foreign capital in Indian economy. FDI also provide financial support to the firms. There are various factors which are responsible for FDI inflow and include such as the availability of large market, demand, qualitative labor force, tax incentives. Further, service sector, telecommunication, computer software and hardware and construction development are the major sectors attracting FDI inflows. This study starts with identifying the factors responsible for the growth in FDI inflow in India, analyses the trend, and impact of policy changes during the economic reforms on FDI inflow. The study is divided into two parts: one is pre perform period and second one is post reform period. The study uses regression models to measure the significance of FDI in determining economic growth and exports.