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DETERMINANTS OF FOREIGN DIRECT INVESTMENT INFLOWS INTO INDIA: A FACTOR ANALYSIS

    1 Author(s):  ANNU

Vol -  4, Issue- 3 ,         Page(s) : 495 - 507  (2013 ) DOI : https://doi.org/10.32804/CASIRJ

Abstract

There has been a growing interest in the determinants of Foreign Direct Investment (FDI) inflows in developing countries like India as FDI is considered one of the most stable components of capital flows. There are so many determinants of FDI inflows viz. market size, portfolio diversification, resource location, differential rate of return, foreign exchange reserves, internationalisation, trade openness, government regulations, political stability, tax policies, inflation, industrial organizations, level of external indebtedness and foreign exchange rate etc. in the economy as suggested by existing literature available on this issue. The purpose of the present study is to empirically examine the major determinants of FDI inflows into India. The variables examined for the study are gross domestic product (GDP), foreign exchange reserves (FER), external debt (ED), inflation rate (INFR), exchange rate (EXCH) and trade openness (TO) i.e. sum of exports and imports as a percentage of GDP. The present study employs factor analysis to identify the major determinants of FDI inflows into India.

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