Testing the relationship between FDI inflow and out flow in India: a critical analysis

This study examines the factors determining FDI inflow and outflow from India using annual data set from the period 1980-2009. More over the study has tested whether FDI inflow has any role in determining FDI out flow and vice versa. The study used stepwise regression for finding the determinants. Trade openness (Trade as a percentage of GDP), Gross Capital Formation, economic stability (Lending Rate as the proxy for economic stability) and FDI outflow are found to be the major factors determining FDI inflow in India. In case of FDI outflow labour cost (workers remittance and compensation of employees received in US $ is taken as a measure of labour cost), market size (GDP in current US $), economic stability (Lending Rate as the proxy for economic stability), Gross Capital Formation and FDI inflow are the major factors that determines FDI outflow in India. And more over FDI out flow has a role to attract FDI inflow to the country