The Non-linear Effects of Selected Macroeconomic Variables on Outward Foreign Direct Investment from India

Foreign direct investment (FDI) outflows from India have a big leap and irregular growth from 1990 to 2023. It becomes necessary to explore the reasons behind such a leap in the outward foreign direct investment (OFDI) trend in India. This study has applied the non-linear autoregressive distributed lag (NARDL) model to analyse the asymmetric effects of selected macroeconomic variables such as GDP per capita, private consumption expenditure, exchange rate, globalisation index (GI), government spending, and inflation rate in directing investment to foreign nations from India during the period from 1990 to 2023. This study has found that an increase in all these variables has long-run and short-run asymmetric causality with OFDI, except for the inflation rate. The inflation rate has no significant long-run relationship with OFDI. The study suggests that India should manage the downswing of GDP per capita and government spending as it may discourage OFDI and also influence the mindset of potential investors. JEL codes : F2, F3, F6