Location Specific Determinants of FDI in Developing Asian Economies: An Indian Perspective

• Published in: Journal of Applied Management - Jidnyasa Vol. 13; no. 1; p. 1
• Main Authors: Gajapathy, V, Chinchane, Uma
• Format: Journal Article
• Language: English
• Published: Pune Symbiosis Institute of Management Studies 01.01.2021
• Subjects: Economic development; Economic growth; Foreign exchange rates; Foreign investment; GDP; Global economy; Gross Domestic Product; Human capital; Influence; Infrastructure; Natural resources; Production costs; India
• ISSN: 0976-0326

Foreign Direct Investment plays an important role in the development of global economy. In fact, many countries rely upon FDI as a driver of real economic growth. Together with economic developments, FDI helps in increased employment, Human Resource Development, Exchange rate stability and creating a competitive market. Increasing growth in Global FDI is confirmation for the same. The massive growth in foreign capital flows across countries is one of the perfect signs of the globalization of the world economy. Although the developed economies have reported decline in the FDI inflows for the year 2018, the Developing economies have shown a growth in FDI inflows. The global FDI has reached a record of $1.39 trillion as on 2019. India as a developing economy relishes the advantage of a relative lower wages, attractive tax regimes and increasing Ease of Doing Business rankings. This constructive business environment has ensured the constant flow of foreign capital in India. According to World Investment Report 2020 by UNCTAD, it said that India was the 9th largest recipient of Foreign Direct Investment in 2019 with 51 billion dollars of inflows during the year. The report also states that, in the developing economies India was among the top five host economies for Foreign Direct Investments. The factors determining Foreign Direct Investments are usually classified as macro & micro economic determinants, Regional determinants, institutional determinants, Firm level determinants and so on. For a developing country, inflow of FDI is as well dependent on the location based determinants and the business environment of the host country. Therefore, this article studies the location specific determinants of foreign direct investment in India and developing Asian economies. The location specific factors determining FDI considered for the study are Human Capital, infrastructure, production costs, market size, openness of the economy, availability of natural resources. Considering these location specific factors for the developing economies, for a specific period of time, this study is focused at identifying the factors affecting FDI inflows into developing Asian economies. Further the paper focuses on identifying the relative performance of India in attracting FDI.