Determinants influencing the flow of FDI in India: an empirical insight using panel data

Abstract Background context: Foreign Direct Investment (FDI) is a crucial driver of economic growth in developing countries like India. The study explores the dynamics of FDI flow between India and developed nations, addressing the broader context of economic relationships. Specific knowledge gap: In this study, we address what influences the inward and outward flow of FDI between India and Developed countries. In addition, we aim to examine the economic phenomena that influence the variables making India attractive to other nations. Methods or approach used: The study used panel data from 2000 to 2023 from different countries, and the one-step system GMM method was used for analysis. The countries are categorized as developed or emerging countries, and the variables India seeks in these countries are examined. Key findings: Proximity, shared language, technological advancements, infrastructure, and trade agreements are key factors influencing FDI, regardless of the development status of partner nations. Emerging countries exhibit similar responses to developed nations under these conditions. Implications or applications: The findings suggest a need for future research on why developed nations fail to achieve similar FDI-driven economic growth as emerging nations. This could inform policy adjustments for leveraging FDI effectively.