Determinants of Foreign Direct Investment in India:A Study of the Pre and Post-Liberalization Period

Foreign Direct Investment (FDI) is an important instrument in the economic development. In the economy to attract FDI major changes are recorded. The purpose of the study to know the trends and difference between pre and post liberalization of FDI inflows and identified relevant determinants of FDI in India by applying Ordinary Least Square Regression. Data from 1980 to 1990 used as pre liberalization FDI trend in India and for post liberalization data is used from 1991 to 2010. Data from 1991 to 2014 has been used to identifying the determinants of FDI inflows. Empirical results revealed that market size, external debt, trade openness, Inflation and infrastructure are the important economic determinants of FDI. This study explores the factors that contribute to the explanation of FDI in India and test whether the variables do really influence the flow of FDI into India. This paper suggest that to make our economic policy more effective towards increasing inflows of FDI, infect results shows that infrastructure is the most important determinant has significant positive impact on FDI inflow in India.