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Bhanumurthy, K. V.
- Equity and Efficiency of Foreign Direct Investment in Indian States
Authors
1 University of Delhi, New Delhi, IN
2 Department of Commerce, PGDAV College, University of Delhi, New Delhi, IN
Source
International Journal of Financial Management, Vol 4, No 4 (2014), Pagination: 20-31Abstract
The two relevant criteria for evaluating the performance of the Indian economy in regional terms, in respect of FDI flows, according to our understanding are efficiency and equity.
Since FDI is primarily a relocation of international production it is based on the principle of optimal resource allocation. The notion of efficiency, in this context, refers to the tendency of FDI to flow to those regions or States which have efficient production. The other side of the coin is that an efficient State deserves to get a greater share of FDI. This spells out the notion of equity.
The paper uses set of new indices, including index of rank dominance, which shows that the most dominant centre is Mumbai. The paper also uses a 2-Stage Least Square (2SLS) estimation procedure, with two panel regression fixed effects models. There is a very high elasticity of FDI flows w.r.t. SDP growth. Also the results show that there is an extremely high negative correlation (-0.996) between equity and efficiency. The states that are more efficient receive less of FDI flows. This points towards non-economic forces in operation that influence FDI flows and regional development.
Keywords
Efficiency, Equity, FDI, SDP, Dominance, Growth.
References
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- Global Outward Foreign Direct Investment and Economic Development:Panel Regression Approach
Authors
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
2 Department of Commerce, PGDAV College, University of Delhi, Delhi, IN
Source
International Journal of Financial Management, Vol 5, No 4 (2015), Pagination: 65-79Abstract
Outward Foreign Direct Investment (OFDI) is in the nature of international relocation of production. OFDI acts as a complementary input in the host country and hence aims at rational allocation of global resources. The pattern of economic development on a multilateral scale would, thus, determine the pattern of OFDI. We consider the effect of economic development on OFDI originated from developing countries, with the help of a set of socio-economic variables.
With the help of Principal Component Analysis we construct a set of six composite indices, namely, human resource, infrastructure, labour, market, trade openness and resource, as determinants of OFDI. We use a panel regression approach both in terms of OFDI stock and flow. The period of study is 1990-2009.
Empirical results indicate that developing countries outflow has not been growing significantly. The annual growth rate of global FDI outflows is 3.2 percent. FDI outflow is mainly from developed countries. Resource is most important determinant because it has elasticity greater than one. Resource and market variables indicate that in long run FDI focused on resource-seeking and market-seeking.