Determinants of Foreign Direct Investment: Empirical Investigation into Post-Reform Era

Foreign Direct Investment (FDI) is dependent on a variety of factors such as growth of gross domestic product, interest rates, exchange rate movement, market size, macroeconomic stability and so on. This paper attempts to estimate the determinants of FDI in India, using regression analysis. Quarterly data from 1996Q1 to 2010Q4 have been used to estimate the main determinants of FDI. The monetary authority (RBI) should develop and implement measures that will ensure that inflation, foreign exchange rates and interest rate are sustained at levels that will ensure increasing level of inflow of FDI. Further, working towards more openness will also attract more FDI to India.