Multifaceted Nature of Foreign Direct Investment Equity Flows in India

Abstract

Purpose: The study examined the multifaceted nature of Foreign Direct Investment (FDI) equity flows in India, focusing on their impact on GDP growth and the changes brought about by the COVID-19 pandemic. Methodology: The research employs an analytical approach using secondary data from 2017 to 2023, drawn from government reports and statistical databases. Statistical tools, including correlation, regression, t-tests, Spearman’s rank correlation, and ANOVA, are applied to analyse the relationship between FDI and GDP, compare pre- and post-pandemic equity inflows, and examine differences across source countries, sectors, and states. Results: The findings reveal a steady positive link between FDI inflows and economic growth, with a correlation coefficient of 0.57. Significant shifts in FDI equity inflows were observed during the pandemic: traditional sources such as Mauritius and Singapore declined, while the Netherlands and the USA gained prominence. Sectorally, there was increased investment in services, software, and automobiles, but declines in telecommunications and construction. The pandemic period saw higher average monthly FDI equity inflows compared to pre-COVID years, with significant differences confirmed by statistical tests. Conclusion: FDI plays a vital role in India’s economic growth, especially during periods of global disruption. Policy reforms and targeted incentives are critical for sustaining FDI, fostering innovation, and supporting key sectors. The study’s limitations include reliance on secondary data and limited consideration of external factors. Scope for Future Research: Future studies could use primary data to capture investor perspectives, examine regional disparities in FDI distribution, and analyse the long-term effects of policy reforms and global events on India’s FDI landscape.