Ease of Doing Business and Its Influence on Foreign Direct Investment in India

The purpose of this research paper is to understand the influence of country’s ease of doing business on foreign direct investment in India, as ease of doing business reflects the country’s business regulatory environment. The ease of doing business index created by World Banks Group is examined to understand the influence on the foreign direct investments. Distance to frontier and various factors are used to measure the business environment and regulation defined by World Bank group which are examined to verify the influence on foreign direct investment inflow in the country. Comparative ranking and distance to frontier is also analyzed in this paper to understand relative ranking of India, as these are compared with South Asian nations and selected developing nations. The paper also analyze the government efforts to improve ease of doing business ranking which slipped recently to 142 among 189 nations in the World Banks’s ease of doing business 2015 study. The study shows that there is influence of ease of doing business on foreign direct investment inflow in India. Some of the factors defined by World Bank are observed to be influencing on foreign direct investments significantly, while other do not. The study shows India is behind in ease of doing business ranking compared to its South Asian peers except Afghanistan and Bangladesh