FDI in Developing Nations: Unveiling Trends, Determinants and Best Practices for India

In the recent UNCTAD World Investment Report 2023, China has the highest FDI inflows among the developing countries, following Brazil, India, Mexico, and Indonesia. These five developing countries attracted more FDI inflows in the year 2022. However, among these five countries, China and the other four countries have a lot of differences in FDI inflows. So, this study investigates the factors helping China get more FDI inflows by analyzing the trends and determinants of FDI inflows. The study also compares all the selected countries to suggest the best practices India can adopt to enhance its FDI attractiveness. So, the study considered economic indicators like GDP, infrastructure, trade openness, and natural resources. Further, panel data analysis was used to investigate the determinants influencing FDI inflows, utilizing the Panel Autoregressive Distributed Lag (P-ARDL) model for the data from 1990 to 2022. The findings showed that trade openness, market size, and quality of infrastructure explain the attraction of FDI inflows in selected countries in the long run. Thus, it is important to implement policies that encourage international collaboration by raising trade, lowering corporate expenses, and making infrastructural investments. India’s availability of a large consumer market, developed infrastructure, and government initiatives like ‘Make in India,’ and "Skill India" have pulled major FDI inflows. India should prioritize manufacturing, IT, and healthcare while improving infrastructure and streamlining regulations.