Evaluating the Long-term Impact of Tax Incentives on Foreign Direct Investment in India: A Sectoral Analysis

The paper analyses sector-specific tax incentives and FDI inflows in India. Using a quantitative research design, the study analyses FDI inflows across manufacturing, technology, and services sectors from 2000 to 2020. The findings reveal that tax holidays, R&D incentives, and BPO tax exemptions significantly influence FDI, with the technology and services sectors showing the greatest effects. The technology sector demonstrated the highest correlation with tax incentives, while the manufacturing sector showed more moderate impacts, suggesting the need for infrastructure and labour market reforms. ANOVA results indicate significant sectoral differences in the impact of tax incentives. Based on these findings, the paper recommends extending tax benefits for R&D and digital infrastructure in technology and introducing targeted incentives for capital-intensive industries in manufacturing. The study also highlights areas for future research, including the role of global economic factors and political stability.