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The Pattern of Inbound Foreign Direct Investment into India

In: Trade, Investment and Economic Growth

Author

Listed:
  • A. Sawhney

    (Center of International Trade and Development, Jawaharlal Nehru University)

  • R. Rastogi

    (Symbiosis Centre for Management Studies (Constituent of Symbiosis International (Deemed) University))

Abstract

Encouraging foreign direct investment (FDI) has been an important development strategy for a capital-scarce economy like India. Systematic reforms and investment liberalization policies adopted since 1991 have substantially increased FDI in the manufacturing industry. The sustained growth of FDI in manufacturing sector and particularly in polluting manufacturing industries raises a question as to what factors have attracted FDI in Indian industries from high-income countries. We address this question by first examining the composition of the FDI inflow by industry-specific characteristics (at disaggregated 3-digit industry classification) of the Indian manufacturing. Second, we analyze the characteristics of high-income source countries determining the FDI in different Indian industries, from 2000 through 2014. We find that FDI inflows have significantly been in capital-intensive industries; within the polluting industries, FDI has been mostly in export-oriented industries. Our source-country analysis reveals that polluting industries have attracted FDI from capital-abundant, large countries and from those with stringent environmental regulations.

Suggested Citation

  • A. Sawhney & R. Rastogi, 2021. "The Pattern of Inbound Foreign Direct Investment into India," Springer Books, in: Pooja Lakhanpal & Jaydeep Mukherjee & Biswajit Nag & Divya Tuteja (ed.), Trade, Investment and Economic Growth, chapter 0, pages 121-131, Springer.
    • Handle: RePEc:spr:sprchp:978-981-33-6973-3_8
    DOI: 10.1007/978-981-33-6973-3_8
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