India has attracted larger FDI inflows and continues to be among the top attractive destinations for international investors, according to an article published in the Reserve Bank of India’s Monthly Bulletin January 2022.
The article was prepared by Sumit Roy, Department of Financial Inclusion and Development, Jolly Roy and Kamal Gupta, Department of Statistics and Information Management, Reserve Bank of India.
The opinions expressed in the article are those of the authors and not those of RBI.
“An analysis of recent trends in FDI flows globally and between regions/countries suggests that India has generally attracted higher FDI flows and continues to remain among the top attractive destinations for international investors, in accordance to its strong domestic economic performance and progressive FDI policy liberalization as part of the cautious process of capital account liberalization, the authors said.
The article states that Foreign Direct Investment (FDI) plays an important role in the economic development of any country and supports economic growth by meeting the investment needs of a capital-deficit economy by bridging its gap between the savings and investment.
Both developed and emerging economies have made considerable efforts to increase the information base on FDI, where valuation is an essential element.
In India, major progress has been made in this regard with the implementation of the Coordinated Direct Investment Survey (CDIS) of the International Monetary Fund (IMF) and the compilation of Foreign Affiliate Trade Statistics (FATS), did he declare.
The Census of Foreign Liabilities and Assets (FLA) of India, part of the global CDIS initiative, has been a major step towards estimating foreign investment and provides consistent annual data on FDI (equities and debts ) in face value as well as in market value. on the full enumeration, the article says.
Analysis of the FLA census results summarized interesting facets of the sectoral distribution of investments and associated performance (FAT statistics) for foreign affiliates.
Foreign trade had a substantial share in the activity where the intensity of imports in purchases remained higher than exports in sales for foreign subsidiaries.
“An empirical analysis of the factors influencing FDI inflows, looking at leading countries in terms of FDI stock position in India, shows that FDI inflows are strongly influenced by trade openness, outlook for economic growth, market size, cost of labor and the openness of the host country’s capital account,” the authors said.
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