Using VAR Model of Indian Economic Factors Impact on Foreign Direct Investment – An Event Study.

Abstract

Purpose: Conducting an empirical study at the present phase of economic advancement suggests that foreign direct investment (FDI) significantly influences the sustained, high-caliber, and robust economic development of the host country. Every country engaged in the economic globalization trajectory is thus striving to foster a competitive business atmospherei domestically, aiming to attract additional foreign investments.

Design/Methodology/Approach: The primary focus of this research centers around Institutional quality or Evidence, with a particular emphasis on 7 selected Indian Economic factors namely Indian Gross Domestic Product, Indian Exports, Foreign Reserves, Gross National Product, Human & National resources, Capital formation & social factors, Technology development, from DPIIT website (Secondary Data) for the period 2022-2023. We are Using stalactitical tools like Unit root Test, ARDL Approach & VAR Model.

Originality/Value: This research uses the VAR Model or technique to examine how institutional variables affect FDI flows. Foreign direct investment (FDI) flows are the dependent variable in this study, and the influence of Economic variables on these flows is evaluated using the ordinary least square approach.

Findings: The study found from Johansen Joining test that co-mix condition exist between the FDI and GDP and stated that FDI coefficient is 0.1646, which indicates positively influenced on GDP. According to the research, foreign direct investment (FDI) is significantly impacting India's GDP development. The aftereffects of the vector auto relapse show that unfamiliar direct investment (FDI) movement is anticipated to lead to an increase in GDP in the near future.. Exports with GDP had co-integrated between each other and examined that export is positively influenced on GDP. The study observed from that FDI had significant growth effect on Indian exports and stated from VAR model that GDP is expected to up in near future based on FDI movement. The study found from Johansen Integration test that co-integration equation exist between the FDI and Foreign Reserve and stated that FDI coefficient is 0.1646 which indicates negatively influenced on Foreign reserve.