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2019•International Journal of Public Sector Performance ManagementRequires access

Determinants of foreign direct investment in India's service sector

Aarti Mehta Sharma, Saina Baby

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Abstract

In the financial year 2016-2017 India attracted an all-time high foreign direct investment (FDI) inflow of US $60.08 billion. A sectoral break up of FDI inflows clearly identifies service sector as the top most FDI destination in the country with a share of 18% in the total FDI inflows during the period 2000 to 2017. The service sector FDI increased from US $4,443 in 2014-2015 to US $8,684 in 2016-2017 registering a growth rate of 95% (DIPP, 2017). The objective of this paper is to identify the major determinants of FDI inflows into India's service sector. Multiple regression analysis has been used to identify the significant determinants of FDI inflows. This study identifies trade openness, real gross domestic product, infrastructure, real interest rate, tertiary education and FDI stock as the significant determinants of FDI into the service sector in India.

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What this paper is about

In the financial year 2016-2017 India attracted an all-time high foreign direct investment (FDI) inflow of US $60.08 billion. A sectoral break up of FDI inflows clearly identifies service sector as the top most FDI destination in the country with a share of 18% in the total FDI inflows during the period 2000 to 2017. The service sector FDI increased from US $4,443 in 2014-2015 to US $8,684 in 2016-2017 registering a growth rate of 95% (DIPP, 2017). The objective of this paper is to identify the major determinants of FDI inflows into India's service sector. Multiple regression analysis has been used to identify the significant determinants of FDI inflows. This study identifies trade openness, real gross domestic product, infrastructure, real interest rate, tertiary education and FDI stock as the significant determinants of FDI into the service sector in India.

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Available abstract

In the financial year 2016-2017 India attracted an all-time high foreign direct investment (FDI) inflow of US $60.08 billion. A sectoral break up of FDI inflows clearly identifies service sector as the top most FDI destination in the country with a share of 18% in the total FDI inflows during the period 2000 to 2017. The service sector FDI increased from US $4,443 in 2014-2015 to US $8,684 in 2016-2017 registering a growth rate of 95% (DIPP, 2017). The objective of this paper is to identify the major determinants of FDI inflows into India's service sector. Multiple regression analysis has been used to identify the significant determinants of FDI inflows. This study identifies trade openness, real gross domestic product, infrastructure, real interest rate, tertiary education and FDI stock as the significant determinants of FDI into the service sector in India.

Key concepts: Foreign direct investment, Business, Economics, Macroeconomics

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