DYNAMICS OF FDI INFLOWS IN INDIA: AN APPLICATION OF ARDL AND FMOLS

This study examines Foreign Direct Investment (FDI) inflows in India, focusing on sectoral trends and determinants from 1980 to 2021. The primary objectives are to analyze the trend of FDI inflows at the sectoral level and to identify the key determinants influencing FDI inflows to India. The methodology involves the use of time-series data sourced from the RBI Databank, World Bank Databank, and OECD Databank. The unique contribution of this study over previous research lies in its detailed sectoral analysis of FDI inflows in India from 1981 to 2021, employing econometric techniques such as the Auto Regressive Distributed Lag (ARDL) Model and Error Correction Model. It not only identifies key macroeconomic determinants but also offers insights into both long-term and short-term dynamics of FDI inflows, providing a more comprehensive understanding of the factors influencing foreign investment in India. The findings reveal no significant structural change in sectoral FDI inflows. Moreover, the study highlights that Gross Domestic Product (GDP), Trade Openness, and Inflation rate are pivotal factors determining FDI inflows in India.