Does cultural economics affect country’s competitiveness?

Abstract

The present study attempts to highlight the causal relationship between FDI and its determinants within Indian Economy. The study courses the period from 1990-91 to 2021-23 and secondary data was collected from various sources of RBI. In order to analysis the data, 37 independent variables have been divided in to eight determinants viz. market size, human capital, opener, natural resources intensity, infrastructure and communication, exchange rates, economic growth and economic stability. By applying Augmented Dickey Filler (ADF). Test and Granger's causality Theorem, the outcomes designate that for India, there exists a dire need to increase FDI inflows in India via proper channels by investing more in infrastructural facilities. Which can further help to modernize the economy. However, the Government of India (GOI) should event those policies which help to enhance international trade, transfer of knowledge and skill development. Capital is described as a catalyst for growth. This assertion has acquired more significance in recent years. Historically, the primary sources of money in developing nations were foreign assistance or loans from international banks. Currently, official development aid flows are consistently diminishing. In addition to other sources, FDI has become more noteworthy in recent years. FDI refers to a kind of investment where foreign investors own ownership of capital and exert influence over the income-generating activities inside the host country. Consequently, it entails both the transfer of cash and the transfer of management and expertise. Developing nations, developing economies, and transitioning countries see FDI as a catalyst for modernization, job creation, and economic advancement. These nations have liberalized their foreign direct investment policies to entice capital. FDI is often associated with productive investment and promotes the transfer of technology, management expertise, and marketing abilities, which may significantly impact productivity and growth. FDI induces technological spillovers, facilitates human capital development, enhances international trade integration, and fosters a more competitive corporate climate. Considering this, Indian Government adopted a liberal outlook towards FDI.FDI inflows inside India rose from US $1657 million in 1990 to US $16339 million in 2000 and further to US $1940000 million in 2022. Moreover, India’s share within world FDI flows had also rose from 0.008 percent in 1990 to 0.219 percent in 2000 and further to 0.987 percent in 2022. While comparing India’s share with all developing countries (44.9 percent in 2011) and developed countries (49 percent in 2022), its share is still low. Thus, considering the increased FDI inflows in the country, this work is an attempt to explore the relationship across FDI along with its determinants in India. Keeping in view the above discussion, secondary data have been used for the current study for the period (1990-91 to 2021-2022). Data have been collected from different sources like RBI, Report on Currency and Finance (Various Issues), and RBI Bulletin (Various Issues), Finance India (Various Issues), along with RBI Annual Report (Various Issues), Economic Survey (Various Issues) etc.

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