THE IMPACT OF FOREIGN INVESTMENT ON INDIA ECONOMY

Abstract

If economy is a body, Investment is its blood and sometime body needs adequate blood for being healthy, we have to bring it from other body, means if an economy need to run with well health, investment is necessary for it and has to bring from other countries, which is called Foreign Investment. In the era of globalization and financial integration, Foreign Investment has emerged as one of the most important forms of capital flows to developing countries. The main objective of present study is to see the impact of Foreign Investment on Indian economy. The study is based on the period of 1991-92 to 2017-18. To analysis the data line graph, correlation and Regression with Newey-West standard errors are used. To check problem of unit root Interpolated Dickey-Fuller test has been also used. Evidences are collected from Reserve Bank of India: handbook of statistics on Indian Economy. In the result we found that there is positive impact on Indian economy and other variable such as Total Debt, Foreign Exchange Reserve, India’s’ Foreign Trade are playing statistically significant positive role to improve economy except NRI’s Deposits which impact is not statistically significant. Although, in the analysis, the result is also found that in the one hand; economy, Total Debt, Foreign Exchange Reserve and NRI Deposits are positive correlated but in the other hand; India’s foreign trade is negatively with other variables. In the conclusion, foreign investment is not only an option of domestic investment, but can also improve the balance of payment of host country. The flow of foreign investment in an economy benefits the economy in terms of investment capital, technology transfer, management skills and job creation. At present, many developing and at least developed countries depend on foreign investment inflows due to less domestic investment and lack of resources.