Open AccessTHE INFLOW OF FOREIGN INVESTMENT AS A FACTOR OF DEVELOPMENT IN INDIA
Author(s) -
Tatiana Rodionova,
Anastasiia Pyrohova
Publication year - 2021
Publication title -
ìnfrastruktura rinku
Language(s) - English
Resource type - Journals
ISSN - 2519-2868
DOI - 10.32843/infrastruct55-7
Subject(s) - foreign direct investment , balance of payments , current account , economics , stock (firearms) , international economics , dividend , capital (architecture) , developing country , investment (military) , gross fixed capital formation , foreign capital , monetary economics , exchange rate , business , macroeconomics , geography , economic growth , finance , archaeology , politics , law , political science
With the transformation of international capital markets, developing countries have become recipients of significant inflows of foreign direct investment (FDI). In recent decades, India has shown the highest growth rate of FDI stock among the BRICS countries. The inflow of foreign capital has become a determining factor of economic development in many countries. Therefore, the aim of this study was to analyze the impact of foreign capital inflows in the form of FDI on the Indian economy during 2000-2020 years. Specifically this period was chosen for the research because it is characterized by the intensification of investment flows to the country. The article analyzes the dynamics, structure, sectoral and regional distribution of FDI flows to India. The results of investment activities of non-residents in the country were also considered in the study. Dividends and withdrawals from income of quasi corporations were found to have increased to record levels in recent years. Investment income payments to non-residents are small relative to total current account liabilities. However, if this trend intensifies, it will negatively affect the current account, which has constantly remained in deficit over the past decade. To determine the role of foreign capital in the economic development of India, a number of regression models were built. Regression analysis of selected items of the current account was carried out to determine the existence of a relationship between FDI flows and the state of the country’s balance of payments. The results of the study confirmed the existence of a significant relationship between FDI and exports, imports and payments of investment income to non-residents. It was also found that FDI inflows contribute more to the formation of export than import. To assess the impact of FDI on India’s economic growth, a regression model for the formation of GDP was built based on the Cobb-Douglas production function. The regression analysis of India’s GDP confirmed a significant positive dependence of GDP on FDI, but showed that foreign capital plays a relatively modest role in the country’s economic growth.