How far governance indicators influence round-tripping FDI? Dynamic panel approach

Purpose Round-tripping foreign direct investment (FDI) affects the true magnitude of FDI inflow, although FDI inflow must be precise. This study aims to identify the primary dimensions of governance in offshore nations and also examines how governance dimensions of offshore countries influence the flow of round-tripping FDI in India. Design/methodology/approach For the study, the top 20 nations for round-tripping FDI inflows to India are analysed for an 11-year period (i.e., 2013 to 2023) by employing both static and dynamic panel analysis techniques. Findings The result points out that India’s round-tripping FDI is positively and significantly correlated with political stability, the absence of violence, government efficacy and the rule of law, while it is negatively and significantly correlated with the control of corruption. Practical implications Round-tripping FDI creates a distinction between genuine and fabricated FDI inflows. The increase in round-tripping FDI negatively affects the social structure of the offshore nation. The research emphasises the social status of governance in offshore nations and helps formulate a robust strategy to mitigate this form of malpractice. Social implications Round-tripping FDI helps to create segmentation between actual and artificial FDI inflow. Enhancement of round-tripping FDI has an adverse impact on the social structure of the offshore country. The study highlights the social position of offshore countries' governance. Originality/value The governance dimensions of offshore nations are directly correlated with India’s FDI inflows. A diminished level of corruption control, a lower degree of political stability and an absence of violence, governmental efficacy and adherence to the rule of law contribute to round-tripping FDI.