Determinants of Foreign Direct Investment in India

the determinants of Foreign Direct Investment (FDI), few of the research have been implemented in terms of India at the region level. In this paper, t...

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TOKYO UN IVERS ITY OF FOR E IGN S TUD IES

Determinants of Foreign Direct Investment in India Region-Sector-Wise Analysis Yu ki T su ch i ya (8211156) Feb ruary 12, 2015

Abs t ract : Whil e there are a num ber of empi ri cal studi es on t he im pact and the det ermi nant s of Forei gn Di rect Investm ent (FD I), few of the research have been im pl em ent ed i n t erms of Indi a at t he regi on l evel . In t hi s paper, t he det ermi nant s of FD I t owards Indi a (dat a from t he peri od 2008 2013) woul d be ex ami ned regi on -wi se, using st at e -wi se dat a. S ect or -wis e GDP would be used as a vari abl e i n order t o anal yz e whi ch m arket being the si gni fi cant det ermi nant . It reveal s that general l y FD I i n Indi a i s rel at ed posi ti vel y wi th GDP per capit a, l engt h of st at e and nati onal hi ghwa ys, GDP of servi ce sect or, num ber of t el ephones per 100 popul ati ons, and am ount of nat ural gas produced. Especi al l y t he resul ts reveal ed t hat the FD I i nfl ows have a si gni fi cant rel ati on wit h t he m arke t siz e of t he servi ce sector of t he i ni ti al year.

Table of Contents For Acknowl edgem ent ......................................................................... 3

1.

Int roducti on ......................................................................... 4

1.1.

Term i nolog y ................................................................. 5

1.1.1. Forei gn Di rect Investm ent (FD I ) ................................ 5

1.1.2. Gross Dom esti c P roduct (GDP ) ................................. 6

1.2.

Di scussi on on FD I ........................................................ 6

1.2.1. FD I as for Indi a ....................................................... 8

1.3.

Di scussi on about FDI Im pact on Econom i c Growt h ......... 8

1.4.

Governm ent of Indi a FD I P ol i ci es ................................ 10

1.5.

Wh y re gi on -s ect or -wi se Indi a i s the S ubj ect ................. 14

1.6.

Li t erat ure R evi ew ....................................................... 19

2.

Dat a ................................................................................... 24

2.1.

Sam pl e S t at es, Uni on Territ ori es, and R egi ons .............. 24

2.2.

Dat a Descri pti on and Theor y ....................................... 26

1

3.

Model and Method .............................................................. 29

3.1.

4.

Model Buil di ng .......................................................... 29

Resul ts and Anal ys e s .......................................................... 32

4.1.

Resul ts and Anal yse s on Ex pl anat or y Va ri abl es ............ 32

4.2.

Resul ts and Anal yse s on St at es, Uni on Territ ori es, and

Regi ons 35

5.

Concl usi on ......................................................................... 40

6.

References ......................................................................... 41

2

For Acknowledgement I woul d l i ke to ex press m y great appreci ati on to P rofessor Kimi ko Uno for her val uabl e and const ructi ve sugges ti ons and assist ance duri ng t he work of t hi s st ud y. I woul d al so li ke t o thank all the m em bers in P rofessor Uno ’s sem i nar for gi ving const ructi ve feedbacks to this st ud y. Di scussi ons t hat were done i n t he semi nar were ver y i nsi ght ful .

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1. Introduction In recent years, Forei gn Di rect Investm ent ( FD I) has been regarded as an im port ant fact or for economi c devel opm ent . As for Indi a, t he am ount of FD I has an i ncreasi ng t rend, and al so t he Gross Dom est i c P roduct (GDP ) is i ncreasi ng ever y ye ar. In m ost em pi ri cal st udi es, it is concluded t hat FD I cont ri but es t o bot h fact or producti vit y and i ncom e growth i n host count ri es, be yond what dom esti c invest m ent woul d norm al l y c ause (OEC D, 2002) . This i s consi dered to be also t he sam e as for Indi a (Kundra, 2009) . Wi t h FD I and GDP ’s gr owi ng amount , t he i nt erest towards Indi a as a dest inati on of FD I ha s been growi ng i n J apan, and recent l y Indi a has assi gned ke y a greem e nt s wit h Japan t o share ‘S peci al St rat egi c Global P artnershi p ’ (C haudhury, 2014). Under the considerati on of previ ous em pi ri cal st udi es on t he rel at ion of FD I and GDP , it coul d be st at ed t hat FD I t ri ggers econom i c devel opm ent i n Indi a. As m ent i oned above, the amount s of FD I have an increas ing t endenc y. However, t he am ount of FD I wi del y var i es dependi ng on each s t at e. If more st at es be abl e t o call in a l arger am ount of FD I, t he economi c gap among st at es would decrease. In a ddit i on, t he whol e nati on woul d be enabl ed t o i ncrease it s GDP. The purpose of t hi s thesi s i s t o ex ami ne the det ermi nant s of FD I towards Indi a. In t hi s pape r, FD I woul d be regarded as a positi ve factor on economi c devel opm ent . B y usi ng regression m odel and regi on -wi se dat a, t he det erm i nants i s t o be observed. Fi nall y t o anal yz e how to prom ot e and i ncrease t he am ount of FD I t hat will benefi t both t he host and invest ing nat ions.

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1.1. Terminology In order t o cl ari f y t he m ain t erm s used i n t hi s paper, som e of t he m ost im port ant words woul d be defi ned i n t hi s secti on .

1.1.1.

Foreign Direct Investment (FDI)

The t erm “FD I” i s defined i n t he Balance of Payment s Manual Fi ft h Edit i on ( IMF, 1993) and i n Det ai l ed Benchmark of Forei gn Di rect Inves t ment : T hi rd Edi ti on (OEC D, 1996) . Accordi ng t o UNCTAD , “FDI r ef ers to an investment made to acquire last ing i nt erest in ent erprises oper at ing outside of t he economy of t he i nvest or. Further, i n cases of FDI, the invest or´s purpose i s t o gai n an eff ect i ve voi ce i n t he management of t he e nt erprise. T he f orei gn ent it y or group of associ at ed ent it i es that makes t he i nvest ment i s t ermed t he " di rect invest or" . The uni ncorporat ed or i ncorporat ed ent erprise -a branch or subsidiary, r es pecti vel y, in whi ch direct i nvest ment i s made -i s ref erred t o as a "dir ect i nvest ment ent erprise" . Some degree of equit y ow nership is al mos t alw ays consi dered t o be associ at ed wi t h an eff ecti ve voi ce in t h e management of an ent erprise; the BPM5 suggests a threshol d of 10 per cent of equit y ow nership to quali f y an i nvest or as a f orei gn di rect invest or.” 1 In short, FD I are i nvestm ent s t hat are done t o di rectl y gai n int eres t s b y adm i ni strat ing fi rms i n host cou nt ri es, such as M&A and

1

UNC TAD “Forei gn Di rect Invest m ent ” (1999)

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green fi el d i nvestm ent . It does not incl ude i nvestm ent s whi ch are done vi a s ecurit i es (so call ed Forei gn P ort foli o Investm ent ).

1.1.2.

Gross Domestic Product (GDP)

The t erm “GDP ” is defi ned i n SNA 1.128 and 2.173 -2.174 (OEC D, 2001). Accordi ng to OEC D, “ Gross domesti c product is an aggregat e measure of pr oducti on equal to t he sum of t he gross val ues added of al l resi dent inst it ut i onal unit s engaged in product ion (pl us any t axes, and mi nus any subsi di es, on products not i n cl uded i n t he val ue of t hei r out put s). T he sum of t he f inal uses of goods and servi ces (al l uses except i nt ermedi at e cons umpti on) measured in purchasers' pri ces, l ess t he val ue of i mports of goods and servi ces, or t he sum of pri mary i ncomes di stri but ed by r es ident producer uni ts.” 2

1.2. Discussion on FDI FD I t owards devel opi ng count ri es has becom e an i nt ernati onal t rend. In 2009, FD I b y pri vat e equit y funds and soverei gn wealt h funds t oget her account ed for over 10% of gl obal FD I fl ows. P E funds are al so m aj or cont ri but ors to cross -border M&A whi ch was t he m ai n fact or of the increas e of gl obal FD I (see Tabl e 1). But in the recent years, a ccordi ng to UNC TAD 3 , alt hough the gl obal FD I rose b y 11%, the developi ng

2

OEC D “OECD Glossar y of St ati st i cal Terms ” (2008)

3

UNC TAD “Global Investm ent Trends Monit or No. 15 ” (2014)

6

nat ions are t rapped i n a hi st ori cal l y l ow share (39%). Despit e t he inform ati on above, t he am ount towards devel oped count ri es i ncreased b y 12% to US $576 bil li on . FD I t o t he European Uni on i ncrease d, whi l e fl ows t o the Uni t ed St at es decl ined. UNCTAD forecasts that t he gl obal FD I fl ows wil l rise graduall y i n 2014 and 2015, t o US$1.6 t rill i on and US $1.8 t ril li on respecti vel y.

Tabl e 1. C ross -Border M&As b y P ri vat e Equit y Fi rms 2000 -2010 (ci t ed from “ Indi a`s FD I Infl ows Trends and C oncepts ” b y K.S . C hal apati R ao, Bis waji t Dhar, 2011)

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1.2.1.

FDI as for India

Indi a has been di st i nguished am ong t he worl d as a FD I dest i nat ion i n recent years as wel l as it s rapi dl y growi ng econom y . Accordi ng to UNC TAD 3 , it has ex peri enced a 17% gro wt h i n FD I i nfl ows, to US $28 bi ll ion. As a m em ber nati on of t he BR IC S, Indi a has been cont inuing t o be a st rong perform er i n at t ract ing FD I. BR IC S `s curr ent share of gl obal FD I fl ows are 22%, whi ch i s as t wi ce of it s num ber before t he fi nanci al cris is i n 2007 -08. In l at e 2012, 6 nat i ons i ncl udi ng Indi a whi ch are AS EAN ’s FTA part ners l aunched t he negot i at ion of the R egi onal Comprehensi ve Economi c P art nership (RC EP ) . Accordi ng t o UNCTAD 4 , Indi a has concluded negoti ati ons wi th ASEAN on t rad e i n servi ces and on invest m ent on December 20, 2012. In addit i on, an FTA between EU and Indi a are under negoti ati on si nce 2007. This is expect ed t o i ncl ude a subst ant i ve invest m ent prot ect i on chapt er .

1.3. Discussion about FDI Impact on Economic Growth Al t hough there are m an y t heori es about t he FD I i mpact on economi c growth, m an y of t hem cl ai m t hat FD I ha s a posit ive effect on host count ri es ’ econom i c growt h. Generall y, FD I i s consi dered t o bri ng vari ous benefit s such as t echnol ogy developm ent, increase of emplo ym ent , and ex pansion of int ernat i onal net works and so on.

4

UNC TAD “ IIA Issues Not e No. 3 ” (2013)

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In t he recent years, the posi ti ve econom i c effect of FD I i n bot h host and hom e count ri es has com e t o be more and more appreci at ed. Accordi ng to Jun and Brewer 5 , The i nt erest i n t he broader rol e of FD I i n sust ai nabl e develo pm ent has been i ncreased. As not e d b y F eldst ei n 6 , there are several advant ages that could be gai ned b y t he FDI host st at e. Fi rs tl y, FD I woul d enabl e t he t ransfer of t echnol ogy. Thi s t ype of benefi t woul d especi all y work on t echnol ogy t hat cannot be gained through fi nanci al i nvestm ents or t rade i n goods and servi ces. It woul d als o prom ot e compet iti on i n t he dom est i c i nput m arket . S econdl y, the recipi ent s of FD I ca n gai n emplo yee t rai ni ng in t erm s of operati ng new busi nesses t hat woul d cont ri but e t o hum an capit al developm ent . Thi rdl y, the profit s gai ned by FD I cont ribut e t o corporat e t ax revenues i n the host count r y.

It i s considered t hat t he cont ri buti on of FD I t o sust ainabl e devel opm ent depend on com bi nat i ons of proj ect feat ures and governm ent poli ci es in an y c ase. In order to im prove t he cont ri bu ti ons , Jun and Brewer 7 st at e t hat a vari et y of publ i c sector i nst it ut ions as well as corporati ons coul d devel op pol i ci es t hat wi ll increase t he cont ributi on.

5

Kwang W. Jun, Thom as L. Brewer and t he World Bank “The R ol e of Forei gn C api t al Fl ows in S ust ainabl e Devel opm ent ” (1997) 6

M arti n F eldst ei n “Aspects of Gl obal Economi c Int egrat i on : Out look for the Fut ure ” (2000) 7

Kwang W. Jun, Thom as L. Brewer and t he World Bank “The R ol e of Forei gn C api t al Fl ows in S ust ainabl e Devel opm ent ” (1997)

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Thi s also i ncludes host governm ent poli ci es. However, t he host governm ent must be m indful of the pot ent i al l y harm ful effects of FD I proj ects. Jun and Br ewer al so m ent ions as cit ed bel ow. “ Improving t he cont ri buti ons of f oreign capit al t o sust ainabl e devel opment , how ever, r equir es much more than si mpl y increasi ng the amount s of f orei gn invest men t in developi ng count ri es. It al so requires host government poli ci es that f ost er competi ti on (and cont rol rest ri ct i ve business pr acti ces ) wi t hi n t he economy and t hat al low t he di verse t ypes of int er nat ional t ransacti ons t hat are essenti al t o t he successf ul operat i on of t ypi cal FDI proj e cts. Such pol i ci es w i ll maxi mi ze t he pot e nt iall y benef i ci al cont ri buti ons of FDI proj ect s to sust ai nabl e devel opment. ” 7

1.4. Government of India FDI Policies It coul d be sai d t hat FD I i n Indi a st art ed wi th t he est abl ishm ent of East Indi a C om pan y i n 1600. Aft er t he S econd W orld W ar, Japanese com pani es st art ed t o i nvest i n the Indi an m arket. Al though Indi a has been not i ced as a huge m arket and dest i nat ion of FD I, i ts governm ent poli c y t owards FD I has went t hrough m an y changes. The pol i c y al so vari es dependi ng on each st at e governm ent . Aft er t he i ndependence of Indi a, t he att enti on t owards busi ness of mult inati onal corporati ons (M NC s ) rose, especi all y for t he poli c y m akers. In 1965, an i ndust ri al poli c y was m ade all owi ng the MNC s t o vent ure t hrough t echni cal col l aborati on. Therefore, the governm ent of Indi a adopt ed a rel at ivel y li beral st ance b y al l owi ng more equi t y.

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The corrupti on has been consi dered as a m ajor obst acl e b y t he M NC s when invest i ng in Indi a. As a whol e nat ion, Indi a ranked 142 n d out of 189 nati ons i n t he Eas e of Doi ng Business Index 8 i n 2014. It i s cons idered corrupt i on is st il l l arge. In addi ti on, t he federal ism is m aking this i s sue more com pl ex t o t he MNC s si nce t he l evel of corrupti on di ffers l argel y dependi ng on each st at e (see Fi gure 1). However, Aam Aadm i P art y (AAP ), whi ch is a st at e pol iti cal part y based on Del hi (NC R ) put ti ng up an i deol ogy of anti -corrupti on, has won 28 out of 70 s eat s i n t he 2013 Delhi l egi sl ati ve assem bl y el ecti on. W it h no part y obt ai ning an overal l m ajorit y, t he AAP em erged as the second l argest part y i n NCR . In t he 2014 Indi an general el ecti on (whi ch was hel d t o cons ti tut e t he 16t h Lok S abha, el ect i ng m em bers of parli am ent for all 543 parl i am ent ar y c onst it uenci es of Indi a. R un i n ni ne phases from Apri l 7 t o Ma y 12, 2014 ), t he Bharat i ya Janat a P art y (BJP ) won 31.0% of all vot es and 282 (51.9%) of al l seats 9 . For resul ts of t he nati onal and regi onal part i es b y a lli ances, see t he fi gure below (Fi gure 2). It was t he fi rs t ti m e since the 1984 Indi an general el ect ions t hat a singl e part y wi nni ng enough seat s wit ho ut t he support of other part i es. The BJ P parl i am ent ar y l eader Narendra Modi , who l ed a posit ive FD I poli c y as the previ ous St at e P ri m e Mi ni st er of Guj arat , was sworn i n as t he 15t h Prim e Mi ni st er of Indi a on 26 Ma y 2014.

8

Worl d Bank “Doi ng Busi ness 2015 Econom y P rofi l e 201 5 Indi a ” (2014) 9

S ource: El ecti on C om mi ssi on of Indi a “General El ecti on t o Lok S abha Trends & R esult 2014 ”

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Fi gure 1. S t at e -Wi se C orrupti on Index (2005)

Source: Transparency Int ernati onal S urve y (2005)

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Fi gure 2. R esul ts of the nat ional and regi onal parti es b y al li ances

Source: El ecti on C ommi ssi on of Indi a

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Under the Forei gn Exchange Managem ent Act (FEMA), forei gn invest m ent was i nt roduced t o Indi a in 1991. The t hen Fi nance Mi ni st er was M anm ohan S i ngh (Si ngh was the previ ous P rim e Mi ni st er). In Sept em ber 2012, a new FD I pol i c y i n ret ail was int roduced. Thi s all owed a ful l forei gn i nvest m ent i n si ngl e brand ret ai l, and 51% in mult i brand ret ai l . B esi des ret ai l , the go vernm ent al l ows FDI i n pharm aceut i cal indust r y (100%), t el ecomm uni cat i on indust ry (100%), and ins urance indust r y (49%) am ongst ot her i ndust ri es. In the Cons oli dat ed FDI Pol i cy of t he Depart m ent of Indust ri al Pol i c y and Prom oti on, Mi ni st r y of C omm erce and Indust r y, Governm ent of Indi a , i t is wri tt en as bel ow: “It i s the int ent and obj ecti ve of t he Government of Indi a to at tract and promot e f orei gn di rect i nvest ment i n order to suppl ement domesti c capit al , t echnol ogy and skil l s, f or accel erat ed economi c growt h. Forei gn Di rect Invest ment , as disti nguished f rom port f ol io i nvest ment , has the connot ati on of est abl ishing a ‘last ing int er es t ’ in an ent erprise that is resident in an economy ot her t han t hat of t he i nvest or.” 1 0

1.5. Why region-sector-wise India is the Subject The R epubl i c of Indi a (see Fi gu re 3 ) is a federat ion consi st i ng 29 st at es (t he 29 t h st at e Tel angana was divi ded from Andhra P radesh on June 2, 2014), and each of t hem owns a st rong aut onom y. The di versifi cati on of poli ti cal parti es due t o t he ri se of l ocal part i es caused poli ti cal 10

Governm ent of Indi a “C onsol i dat ed FD I P ol i c y ” [ Chapt er -1, 1.1, 1.1.1] (Effecti ve from Apri l 17, 2014)

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decent raliz ati on of power. Therefore from 1990 onwards, t he prom oti on of i ndust ri al poli c y, i nfrast ruct ure devel opm ent , preparati on of educat ional facil it i es, et c. has been carri ed out b y each st at e governm ent . For i ns t ance i n Guj arat, posi ti ve FD I pol i ci es l ea d t o a rapi d economi c growth (the then S t at e P ri m e Mi nist er was t he current Federal P ri m e Mi ni st er Narendra Modi ).

Fi gure 3. The Poli ti cal Map of Indi a

Source: www.m apsofi ndi a.com (2014)

15

There are m ai nl y t wo reasons wh y Indi a was chosen as the subj ect for t hi s st ud y. Fi rstl y, Indi a has been ex peri encing a rapid economi c growth si nce t he 2000s (see Fi gure 4 ). In t he l at e 2000s, i t s growth rat e reached 7.5%, and t hi s doubl ed the average i ncom e i n a decade . As t he econom y grew t he F D I i nfl ows have al s o i ncreased rapi dl y ( see Fi gure 5 ). In addi ti on, a recent UNC TAD survey shows Indi a as t he second most i m port ant FD I desti nati on aft er C hi na, especi all y for t ransnati onal corporati ons from 2010 t o 2012 1 1 . Therefore, Indi a has been recogniz ed as a huge m arket and al so as a desti nati on of FD I am ong t he world. It is obvious that t he stud y about FD I t owards Indi a m ust be done furt her i n order to gai n benefit for bot h t he hos t and hom e invest ing count ri es. Secondl y, i t i s n ecessar y t o anal yz e t he Indi an FD I i nfl ows regi on -wi se to i m pl em ent an out -and -out devel op of the Indi an econom y as a whol e nat ion . The current FD I t owards Indi a are concent rat ed t o som e regi ons as s hown i n t he t abl e bel ow (see Tabl e 2). As m ent i oned i n 1.4 Gover nment of India FDI Pol i ci es and t he previous paragrap h , Indi a `s poli ti cal st at us is compl ex due to local pol it i cal part i es and corru pti on. Therefore, t he R epubl i c of Indi a i s recent l y ex peri enci ng a huge soci al economi c t ransi ti on and devel opm ent . Thi s i s wh y i t i s wort h st ud yi ng on FD I t owards Indi a regi on -wise.

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S ource: Bhav ya Ma lhot ra “Forei gn Di rect Investm ent: Im pact on Indi an Econom y” (2014), p. 18

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Fi gure 4. GDP per capi t a and GDP growth rat e of Indi a 1960 -2012

12 10 8 6 4 2 0 -2 -4 -6 -8

GDP per capita (current US$) GDP growth (annual %)

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

1800 1600 1400 1200 1000 800 600 400 200 0

Source: World Development Indicators

Fi gure 5. Forei gn Di rect Investm ent net i nfl ows 1960 -2012

50000000000 40000000000 30000000000 Foreign direct investment, net inflows (BoP, current US$)

20000000000 10000000000 0

Source: World Development Indicators

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Tabl e 2. S t at e-wise Num ber of Approval s and Am ount Approved of FD I August , 1991 -December. 2004 (cit ed from “ Im pact of FD I i n Indi a: St at e-Wi se Anal ysi s i n an Econom i c Fram ework ” b y Vani Archana, N.C .Na yak & P . Basu, 2014)

St a t es/ UT s A nd h r a. P As sam Bi h ar Gu j ar at Ha ry a na H im a ch a l . P J&K Ka rn at ak a Ker a la M a dh ya . P M a ha ra s ht ra M a ni p u r M eg h al ay a Na g a la n d Or is sa P u nj a b Ra ja st h a n Tam il Na d u Tr i pu r a Utt a r. P Wes t B e ng a l Ch h at ti s ga r h J ha rk h a n d Utt a ra nc h a l Ar u n ac h al . P Ch a n di g a rh D el h i Go a P o n d ic he rr y

N o. of A p pr ov a l s 1296 19 49 1242 882 102 5 2649 336 243 5064 2 5 2 141 203 344 2686 4 815 689 48 81 52 2 86 2816 285 130

FDI A p pr ov e d (Rs. Mi l l i o n) 1 1 6 3 4 4 .4 1 4 .9 5 7397.05 1 2 4 6 2 5 .1 3 8 7 6 3 .0 8 1 2 2 6 6 .4 5 8 4 .1 1 9 0 9 6 3 .9 1 7 8 1 5 .4 2 9 2 7 1 4 .0 8 3 7 1 0 7 7 .9 3 1 .8 5 5 2 9 .6 3 6 .8 8 2 2 9 3 .1 3 2 1 3 0 3 .5 4 2 9 1 1 2 .1 1 2 2 6 5 1 2 .9 3 0 .8 8 4 8 3 6 5 .6 3 7 7 9 7 1 .3 6363.03 1465.15 1256.49 1 1 0 .6 3241.7 3 0 5 2 2 6 .3 9993.78 1 2 8 6 1 .5 3

Amt. of F DI A pp r ov e d (U S$ . Mi l l i o n) 3055.12 0 .4 8 1 8 0 .1 8 3278.24 1020.38 3 0 9 .4 3 2 .4 2 4837.22 4 4 6 .6 9 2520.93 9640.37 0 .8 9 1 3 .6 6 1 .0 3 2355.78 5 3 4 .9 8 7 8 2 .2 9 5895.99 0 .7 4 1307.93 2167.03 1 8 3 .3 3 4 2 .6 7 3 8 .6 6 3 .5 2 8 0 .3 4 8445.36 2 5 1 .9 3 3 1 3 .7 4

Source: Mi ni st r y of Comm erce and Indust r y, Governm ent of Indi a

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1.6. Literature Review Al t hough the st udi es on FD I det ermi nant s in the cont ext of Indi a especi all y t hose whi ch were anal yz ed st at e -wi se are ver y l i mit ed, t here a quit e a few studi es done on vari ous regi ons. In t hi s secti on, host count ri es` econom i c det ermi nant s of FDI i n previous st udi es woul d be invest i gat ed. Most of t hem concl ude t hat t he m ain det ermi nant s are M arket siz e (GDP ), Labor cost , Infrast ructure, C urrenc y val ue , Gross Capit al form at ion (gross dom esti c i nvest m ent ), count r y ri sk , infl at ion rat e, int erest rat e, growt h rat e, t rade openness rat e (t he perc ent age of exports or im port s i n t he nati on ’s GDP ) , Ex t ernal debt, and so on. Bel ow are s om e of t he m aj or and recent studi es. Moosa (2002) 1 2 surveys t h e t heori es of FD I, especi all y vari abl es that were not readi l y rel at ed t o an y of t he t heori es at t hat t i m e. Most of the vari abl es i nvesti gat ed i n t hi s stud y c oul d be i ncl uded i n the UNC TAD`s cl assi fi cati on 1 3 of t he det erm i nant s of i nward FD I shown i n the t ab l e below (Tabl e 3).

12

Im ad A. Moosa “Forei gn Di rect Investm ent Theor y, Evi dence and Practi ce” (2002) 13

UNC TAD “W orld Investm ent R eport 2002 Transnati onal C orporati ons and Export Compet it iveness ” (2002)

19

Tabl e 3. The UNC TAD`s Cl assi fi cati on of FD I Det erm i nants

Determining variables

Examples

Policy variables

T a x p o l i c y, t r a d e p o l i c y, p r i v a t i z a t i o n p o l i c y , macroeconomic polic y

Business variables

Investment incentives

Market-related economic

Market size, market growth, market structure

determinants Resource-related economic

Raw materials, labor cost, technolog y

determinants Effic ienc y-re la te d ec onom ic

Transport and communication costs, labor

determinants

productivit y

Source: UNC TAD (2002) Moosa and C ardak (2006) 1 4 exami ne d t he det ermi nant s appl yi ng anal ys i s t o cross -secti onal dat a on 138 count ri es. The resul ts reveal three robust det ermi nant s. Export s as a percent age of GDP , t el ephone li nes per 1000 of t he popul ati on, and count r y ri sk. As a conclusi on, it i s st at ed that i n devel opi ng count ri es wi th l arge economi es, a hi gh degree of openness and l ow count r y ri sk t end t o be more successful that others in at t racti ng FD I. ÇEV IS and Ç AMUR DAN (2007) 1 5 devel oped an em pi ri cal fram ework t o es ti m at e the economi c det e rm i nant s of FD I b y adopti ng a panel dat a set of 17 devel opi ng count ri es and t ransit ion economi es for 14

Im ad A. Moosa, Bul y A. C ardak “The det erm inants of forei gn di rect invest m ent: An ex t rem e bounds anal ysi s” (2006) 15

Đs m ai l Ç evi s and Burak Ç am urdan ”The Econom i c Det erm i nant s of Forei gn Di rect Investm ent i n Devel opi ng C ount ri es and Transi ti on Econom i es” (2007)

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the peri od of 1989 -2006. The y used seven vari abl es: t he previous peri od FD I (t he pull factor for new FD I), GDP growth (m easures m ar ket siz e), wage (uni t l abor costs), t rade R at e (m easures t he openness of count ri es), the real int erest rat e s (m easures m acroeconomi c poli c y), i nfl ati on rat e (as count r y ri sk and m acroeconom i c pol i c y), and dom est i c i nvestm ent (busi ness cli m at e). In t hi s pap er i t was found out that FD I of t he previ ous peri od whi ch i s di rect l y rel at ed t o the hos count ri es` econom i c resources i s im port ant as an econom i c det erm inant. In addi ti on, i t reveal ed t he m ai n det erm inants are i nfl ati on rat e, int erest rat e, growt h rat e, a nd openness rat e. Az am and Lukm an (2010) 1 6 exami ned a vari ous economi c fact ors` effects on FD I i nflows in the cont ext of Pakist an, Indi a, and Indonesi a. The st ud y peri od ra nged from 1971 -2005. The resul ts reveal ed t hat m arket siz e, ext ernal debt , dom esti c i nvest m ent , t rade openness, and ph ys i cal i nfrast ruct ure are t he i mport ant det ermi nant s of FD I. It was als o concluded t hat the result s of t he det erm inant s of Indi a m at ched thos e of P aki st an `s , ex cl udi ng t rade openness and governm ent cons um pt i on. Fi nall y, i t proposed t hat t he m anagem ent aut hori ti es of t he three count ri es need t o ensure econom i c and pol iti cal st abi li t y, provis ion of infrast ruct ure, peace and securi t y, l aw and order sit uati on, encouragem ent of dom est i c i nvestm ent , curt ail ext ernal debt , and equ al im port ance be gi ven t o appropri at e monet ar y and fiscal pol i c y. 16

M uham m ad Az am, Li n g Lukm an “Det ermi nant s of Forei gn Di rect Inves tm ent i n Indi a, Indonesi a and P aki st an: A Quanti t at i ve Approach” (2010)

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Vi j a yakum ar, S ri dharan, and R ao (2010) 1 7 im pl em ent ed an ex am i nat ion concent rati ng on the FD I t owards BR IC s count ri es using dat a from t he peri od of 1975 -2007. The st ud y fi nds out t hat m arket siz e, l abor cost, i nfrast ructure, currenc y val ue and gross capit al form ati on as the pot ent i al det erm inant s of FD I i nflows of BR IC S count ri es. The economi c st abi li t y a nd growt h prospects (m easured b y i nfl at ion rat e and indus t ri al producti on respect i ve l y), t rade openness (m easured b y t he rati o of t ot al t rade t o GDP ) seem ed t o be t he i nsi gni fi cant det erm inant of FD I i nfl ows of the BR ICS count ri es. In Maggon `s (2012) 1 8 st ud y, i t is concl ude d t hat t he boost FD I inflows si gni fi cant l y depend on furt her li beral iz at i on of it s forei gn invest m ent regi m e.

The resul ts of the above m enti oned em pi ri cal st udi es on the FD I det ermi nant s are li st ed i n t he fol l owi ng t abl e (Tabl e 4).

17

Nara yanam urt h y Vi j a yakum ar, P erum al Sridharan, Kode C handra Sekhara R ao “Det ermi nant s of FD I i n B R IC S C ount ri es: A panel anal ys i s” (2010) 18

M ohi t a Maggon “Ec onomi c and P ol i c y Det erm inant s of Forei gn Di rect Inves tm ent : An Em piri cal Anal ysi s i n C ont ext of Indi a” (2012)

22

Tabl e 4. The R esul t s of t he Em pi ri cal St udi es on t he Det erm inant s of FD I Em pi ri cal St udi es UNC TAD (2002)

Moos a and C ardak (2006) ÇEV IS and Ç AMUR DAN (2007)

Az am and Lukm an (2010)

Vi j a yakum ar, S ri dharan, and R ao (2010) M aggon (2012)

The Det erm inants of FD I Tax pol i c y, t rade pol i c y, pri vat iz ati on poli c y, m acroeconom i c poli c y, i nvest m ent i ncent ives, m arket siz e, m arket growth, m arket st ruct ure, raw m at eri al s, l abor cost, t echnol ogy t ransport and com m uni cat i on costs, l abor product i vit y. Export s as a percent age of GDP, t el ephone l ines per 1000 of t he popul ati on, and count r y ri sk. FD I i nflows of t he previ ous peri od, infl at ion rat e, i nt erest rat e, growt h rat e, and openness rat e. Market siz e, ex t ernal debt , dom est i c invest m ent , t rade openness, and ph ysi cal infrast ructure. Market siz e, l abor cost, infrast ructure, currenc y val ue and gross capit al form at ion . Li beral iz ati on of i ts forei gn invest m ent regi m e .

In t hi s paper, the det erm inant s of FD I t owards Indi a (dat a from t he peri od 2008 -2013) would be ex ami ned regi on -wi se, using st at e -wise dat a . Sect or -wi se GDP woul d be used as a vari abl e in order to anal yz e whi ch m arket being t he si gni fi cant det ermi nant .

23

2. Data 2.1. Sample States, Union Territories, and Regions 24 st at es and Uni on Terri t ori es of t he R epubli c of Indi a were sel ect ed. It cons is ts Andhra P radesh , Bi har, C hhatt i sgarh , Goa, Guj arat , Har yana, Hi m achal P radesh, Jharkhand, Karnat aka, Keral a, Madh ya P radesh, M aharasht ra, Odi sha , Punj ab, R aj ast han, Si kki m , Tami l Nadu, Ut t ar Pradesh, Ut t arakhand, W est Bengal , Andam an & Ni cobar Isl ands, Chandi garh, N at i onal C apit al Terri tor y of Indi a (Del hi ), and Pondi cherr y.

12 st at es and Uni on Terri t ori es were ex cluded due t o t he reasons m enti oned bel ow. The seven st at es of Nort h -East Indi a ( Arunachal Pradesh, Assam, Mani pur, Meghal a ya , Miz oram , Nagal and, and Tri pura ) were ex cl uded due t o t he l ack of dat a. J amm u & Kashm i r were cons idered not appropri at e for t hi s study because of t he conti nuous ins ecuri t y of t he soci al sit uati on. Tel angana, also due t o t he soci al ins ecuri t y, but also si nce t he s t at e has j ust becom e independent from Andhra P radesh i n 2014 , currentl y no dat a ex ists. In t his paper, Andhra Pradesh and Tel anga na woul d be considered as a singl e st at e equal l y as it was unti l J une 1, 2014. Three Union Terri t ori es (Dadra and Nagar Havel i, Dam an and Di u , and Lakshadweep ) were consi dered t hat the y do not have a l arge siz e of econom y enough t o have an infl uence t o FD I inflows .

In order t o im pl em ent t he anal ysi s, 15 st at es and Union Territ ori es among t he sel ect ed 24 were di vi ded i nt o six groups as referred i n t he 24

fol lowing due t o t he form of FD I dat a compil ed b y t he Departm ent of Indust ri al P ol i c y & Prom oti on, Governm ent of Indi a. 1.Utt ar P radesh & Ut t arakhand, 2. Tam i l Nadu & Pondi cherry, 3.W est Bengal , Si kkim , & Andam an & Ni cobar Isl ands , 4.Madh ya Pradesh & Chhatt isgarh, 5.Punj ab, C handi gar h, Har yana, & Him achal P radesh, 6.Bi har & J harkhand. Thus, t here are 15 t arget st at es, Union Terri tori es and regi ons as shown i n the fi gure bel ow . (Fi gure 6)

Fi gure 6. Geograph y of 15 Target S t at es, Un ion Terri tori es and R egi ons (Nat i onal C api t al Terri t or y of Indi a: Del hi i s not shown due to t he siz e.)

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2.2. Data Description and Theory In t hi s st ud y, i n order t o anal yz e t he det ermi nant s of FD I i n Indi a, t en vari abl es are i ncl uded. Among t hem FDI i s t he ex pl a i ned vari abl e, and the ot her nine are ex pl anator y vari abl es. The t en vari abl es are cons idered as shown i n Tabl e 5.

Tabl e 5. Li st of Vari abl es Ex pl a nat or y Var i ab l e

De f i ni t i o n

T he Di r ect i o n of E xpe ct e d Eff ect No ne

𝐺𝐷𝑃𝑖(𝑡−1)

G DP ( c ur r ent In di an Ru pe e i n cr or e)

GDPPC𝑖(𝑡−1)

G DP p er ca pi t a ( cur r en t In d i a n Ru pe e i n cr or e )

+

𝐸𝑋𝑃𝐸𝑃𝐶𝑖(𝑡−6)

Ex pe ndi t ur e on edu cat i o n per capi t a ( c ur r ent In di an Ru pe e i n cr or e)

No ne

𝐻𝐿𝑖(𝑡−1)

Le n gt h of st at e an d nat i on al hi gh wa ys ( km)

+

𝐻𝐷𝑖(𝑡−1)

Hi gh wa y d e ns i t y ( km per 10 0 sq . k m of l a nd ar ea ) G DP of s er vi ce sect or ( c ur r ent In di an Ru pe e i n cr or e ) G DP of mi ni n g and q ua r r yi n g sect or

+

𝐺𝐷𝑃𝑆𝑖(𝑡−1)

𝐺𝐷𝑃𝑀𝑖(𝑡−1)

+ ( ex pec t e d t o ha ve a si gni f i can t eff ect .) + or - ( i n r es our ce - r i c h st at e s )

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Re as ons f or In cl u si o n In di cat es mar ket s i ze of t he wh ol e st at e . Ge ner al l y i t i s co nsi d er e d l arger mar ke t s r e cei v e mo r e F D I. In di cat es ci t i ze ns ’ aff l ue nc e ( l i vi n g st an da r d) a nd ma r ket si ze . In di cat es t h e qu al i t y of hu ma n ca pi t al . T he t r an sf er of ad va nc ed t ech n ol o gy r e q ui r e s t he pr e sen ce o f hu ma n capi t al . In di cat es t h e st at e cap aci t y of FD I acc ept an ce i n t he co n t ext of i nf r ast r u ct ur e de vel op me nt . In di cat es i n f r a st r uct u r e f aci l i t i e s, t h e ea se of i mpl e me nt i n g bu si n es s. In di cat es ma r ket si ze of t he tertiary ( s er v i ce) sect or. In di cat es mar ket s i ze of t he mi n i n g sec t or.

𝑇𝐸𝐿𝑖(𝑡−1)

Nu mb e r of t el e ph on e s pe r 10 0 po pul at i on s A mo un t of 𝑁𝐺𝑃𝑖(𝑡−1) nat ur al gas pr o du ce d ( mi l l i o n met r i c st an da r d c ubi c me t er s) Re s po ns e Var i ab le 𝐹𝐷𝐼𝑖𝑡

+

In di cat es i n f r a st r uct u r e f aci l i t i e s, t h e ea se of i mpl e me nt i n g bu si n es s. In di cat es r e so ur c e r el at ed eco no mi c de t er mi na nt s.

+

De f i ni t i o n F D I ( c ur r e nt In di a n R upe e i n cr or e )

e.g.: 𝐺𝐷𝑃𝑖(𝑡−1) st and for t he GDP of st at e s or Union Territ or y or re gi on (here, the st at es that were divi ded i n six groups) i at ti m e t -1.

Data sou rce GDP : Mini st ry of St at isti cs and Programme Impl ement at ion GDP per capit a: Mi nistry of St at isti cs and Programme Impl ement at i on, Mi nis tr y of Home Af fairs Expendi ture on educati on per capit a : Budget document s of t he stat e gover nment s , Minist ry of Home Aff ai rs Lengt h of st at e and nat ional hi ghwa ys: Mi nistry of Road Transport & Hi ghw ays Hi ghwa y densit y: M inistry of Road Transport & Hi ghw ays, Mi nistry of Home Aff ai rs GDP of servi ce sect or: Pl anning C ommi ssion Government of India GDP of mi ni ng and q uarr yi ng sect or : Pl anning C ommi ssion Government of India Num ber of t el ephone per 100 popul ati ons : Depart ment of Tel ecommuni cati ons Mi ni st ry of C ommuni cat i ons & Inf ormati on Technol ogy Am ount of nat ural gas produced: Minist ry of Pet rol eum & N atural Gas Economi cs and Stati st i cs Di vi si on FD I: Depart ment of Indust ri al Pol i cy & Promot ion Mi ni st ry of Commerce & Indust ry 27

The used FD I dat a are of 2008 -2013, whil e GDP , GDP per capi t a, Lengt h o f st at e and nat ional hi ghwa ys , Hi ghwa y densit y, GDP of servi ce s ect or, GDP of m ini ng and quarr yi ng se ctor, Number of t el ephone per 100 popul ati ons , and Amount of natural gas produced are t i m e l agged for mi nus one year, thus thes e dat a are of 2007 -2012. Ex p endi ture on educat ion per capi t a are t im e l agged for mi nus six years, from 2002 2007.

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3. Model and Method The obj ecti ve of thi s st ud y i s t o reveal whi ch fact ors are the si gni fi cant det ermi nant s t o t he FD I i nflow, and t o fi gure out on whi ch ci rcumst anc es (on whi ch st at es, or regi ons wi t h what ki nd of envi ronm ent ) t hose det ermi nant s could be appl i ed. In t hi s paper, a mult ipl e regressi on model woul d be used for t he anal ysi s. It i s based on cros s -st at e anal ysi s using ordinar y l east square m et hod (OLS ).

Since t he purpose of t hi s stud y i s to anal yz e t he FD I det erm i nant s in Indi a region and sect or wi sel y, the st at es and Uni on Terri tori es are grouped and anal yz e d i n five wa ys m enti oned bel ow: 1.All In di a 2.R es ource -ri ch st at es (mi nerals) 3.R esource -ri ch st at es (nat ural gas) 4.BJ P admi ni st rati ng regi ons 5.S t at e owned ent erprises (S OEs) abundant regi ons .

3.1. Model Building The model coul d be wri tt en as bel ow.

𝐹𝐷𝐼𝑖𝑡 = 𝑎0 + 𝑎1 𝐺𝐷𝑃𝑖(𝑡−1) + 𝑎2 𝐺𝐷𝑃𝑃𝐶𝑖(𝑡−1) + 𝑎3 𝐸𝑋𝑃𝐸𝑃𝐶𝑖(𝑡−6) + 𝑎4 𝐻𝐿𝑖(𝑡−1) + 𝑎5 𝐻𝐷𝑖(𝑡−1) + 𝑎6 𝐺𝐷𝑃𝑆𝑖(𝑡−1) + 𝑎7 𝐺𝐷𝑃𝑀𝑖(𝑡−1) + 𝑎8 𝑇𝐸𝐿𝑖(𝑡−1) + 𝑎9 𝑁𝐺𝑃𝑖(𝑡−1) + 𝑒𝑖𝑡 The model used b y Moosa and C ardak (2006) i s as t he foll owi ng.

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n

FDIi = α0 + ∑ αj Xji + εi j=1

Where FDIi is forei gn di rect i nvest m ent i nfl ow to the count r y i as the vari abl e, Xji t he jth vari abl e of count r y i. In the Moosa and C ardak (2006) m odel , vari abl es such as GDP , GDP per capit a, wages, t rade barri ers, growt h rat e, t rade defi ci t ex change rat e, t ax rat e et c … In t hi s paper, t he m odel includes ni ne expl anat or y e conom i c vari abl es . The y are GDP , GDP per capi t a, ex pe nd i t ur e on e d u cat i on p er ca pi t a , l e n gt h o f st at e and nat i on al hi gh w a ys , hi gh w a y d en si t y , G D P of se r vi ce se ct o r , G DP of mi ni n g an d q uar r yi n g sect or , nu mb er of t el e ph on e s pe r 10 0 po p ul at i o ns , an d a mou nt of nat ur al gas pr od uc ed (among them one vari abl e: NGP are used

onl y i n anal ysi s on r esource -ri ch st at es ).

In t he Moosa and C ardak (2006) m odel , as for t el ecom muni cati on infrast ructure indi ca tor t el ephone l ines per 1000 of t he popul ati on are us ed. In t his m odel , the num ber of t el ephones per 100 popul ati ons would be us ed inst ead. As for anot her i ndi cator of infrast ructure , l engt h of st at e and nati onal hi ghwa ys and hi ghwa y d ensi t y woul d be used. Both GDP and GDP per capi t a are i ncl uded not onl y t o m easure t he m arket siz e, but also t o i ndi cat e t he i ndivi duals’ l ivi ng st andard. Ex pendit ure on educat ion per capi t a i s ti m e l agged f or mi nus six years since the effect of educati on t ake m ore t i m e t o affect t he hum an capit a l economi call y. In or der t o anal yz e the det erm inants sect or -wi se, GDP of

30

s ervi ce sect or, GDP of mi ning and quarryi n g sector, and am ount of nat ural gas are incl uded as an ex pl anat ory vari abl e .

31

4. Results and Analyses The resul t of t he regression anal ysi s (see Appendix ) shows t hat the coeffi ci ent s are suffi ced for all the anal ysi s done among all the groups. Therefore, i t coul d be said that t he equati on is appropri at e and concl usi ve in ex pl ai ni ng the det erm inan t s of FD I. The resul t s show t hat in m ost cases, t he vari abl es used i n t his stud y ( ex cl uding ex pendit ure on educat ion per capi t a) could be regarded as det erm inants of F D I i n t he cont ext of Indi a. In the fol lowing sect ion, the det ermi nant s would be anal yz ed.

4.1. Results and Analyses on Explanatory Variables GDP: In al l cases, t he st at e ’s m arket siz e of the init i al year showed a negat ive i nt errel ati on or had no correl ati on wi t h t he FD I. It c oul d be concl uded t hat i n the recent years, t he FD I t oward Indi a are not focusi ng on the whol e Indi an m arket .

GDP p er cap i ta : It showed a posit ive rel at ion wit h t he FD I ex cl udi ng the ri ch -resourced regi ons whi ch produces a huge amount of nat ural gas. From this result , i t i s reveal ed that i n ri ch -resourced regi ons, t he FD I are m ai nl y focusi ng on the raw m at eri al s, rat her t han the m arket . In ot her s t at es, it coul d be concl uded that a l arge rat io of FD I a re focused on the local m arket .

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Exp end i tu re on edu cati on p er cap i ta : In all cases it di d not have an y rel at ion wi th FD I. It revea l s t hat FD Is whi ch t ransfers advanced t echnol ogy onl y occ upi es a fracti on of t he whol e FD I i nflow.

Length of state and n ati on al h i ghways : It showed a positi ve rel ati on, ex cl udi ng the ri ch -resourced regi on. Thi s reveals that t he ca paci t y of devel opi ng i nfra st ructure coul d be consi dered as a si gni fi cant det ermi nant of FD I.

Hi ghw ay d ensi ty : It di d not show an y posit ive effect . Thi s result coul d be regarded as a resul t of t he rapi d gro wt h of the t ert i ar y s ector, whi ch requi res few transport at ion i nfrast ruct ures .

GDP of servi ce sector : It showed a si gn ifi cant posi ti ve rel at ion i n all cas es . It reveal s t hat on al l regions i n In di a, t he FD I are focused on t he t ert i ar y sect or.

GDP of mi n in g an d qu arryi ng sector : It showed a negat i ve rel at ion onl y i n the regi on whi ch possess natural gas, and i n other regi ons i t did not have an y correl ati on . It i s consi dered t hat t hi s result i s caused b y Indi a’s uni que energy envi ronm ent . In m an y ri ch -resourced regi ons, t he governm ent owned publi c corporati ons are t he domi nant act ors. Thi s m akes t he forei gn energy ent erpri ses rel uct ant to advance to Indi a.

Nu mb er of tel eph ones p er 100 p opu lation s : It showed a posi ti ve rel at ion i n m ost cases. Thi s coul d be considered as a resul t of t he rapid growth of t he GDP per capi t a and t he GDP of servi ce sect or.

33

Amoun t of natu ral gas p rodu ced : S howed a posit ive rel at i on (anal yz ed onl y i n ri ch -resourc ed region). C om bi ned wit h t he result of GDP of m ining a nd quarr yi ng sect or , i t reve als that m an y forei gn ent erprises focus on t he resource, but does not i nvest di rectl y t o produce m at eri al s.

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4.2. Results and Analyses on States, Union Territories, and Regions Al l In di a anal ysis (see Tabl e 6): It reveal ed that general l y i n Indi a, t he m arket siz e of t he servi ce sect or i n t he init i al year has a si gni fi cant posi ti ve rel at ion wit h FD I i nfl ows. On t he cont rar y, t he whol e m arket siz e of each st at e i n the i nit i al year has a negat i ve re l ati on. In addi ti on, the hi ghwa y l engt h also had a posit i ve rel at ion whil e the hi ghwa y dens it y had a negat i ve rel ati on. This coul d be ex pl ained b y the forei gn ent erprises’ focus on t he servi ce sect or si nce i t does not requi re m uch trans port i nfrast ruct ure.

Tab l e 6. Al l In di a anal ysi s 概要 回帰統計 重相関 R 0.87311 重決定 R2 0.76232 補正 R2 0.738846 標準誤差 6233.438 観測数 90 分散分析表 自由度 変動 分散 観 測された分散比 有意 F 回帰 8 1.01E+10 1.26E+09 32.47438 3.1E-22 残差 81 3.15E+09 38855749 合計 89 1.32E+10

切片 GDP GDPPC EXPEPC HL HD GDPS GDPM TEL

係数 標準誤差 -7971.66 2603.828 -0.08188 0.009514 968351 474649.8 -6.6E+07 1.14E+08 0.684636 0.131923 -8037.95 2411.56 0.228197 0.023999 0.027057 0.116934 59.63302 26.20715

t -3.06151 -8.60615 2.040138 -0.57819 5.189669 -3.33309 9.508404 0.23139 2.275449

P-値 下限 95% 上限 95%下限 95.0%上限 95.0% 0.002988 -13152.5 -2790.86 -13152.5 -2790.86 4.78E-13 -0.1008 -0.06295 -0.1008 -0.06295 0.044595 23946.72 1912755 23946.72 1912755 0.56474 -2.9E+08 1.61E+08 -2.9E+08 1.61E+08 1.53E-06 0.422151 0.947121 0.422151 0.947121 0.001297 -12836.2 -3239.7 -12836.2 -3239.7 7.87E-15 0.180445 0.275948 0.180445 0.275948 0.817595 -0.2056 0.259718 -0.2056 0.259718 0.025521 7.489017 111.777 7.489017 111.777

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Resou rce -ri ch states (mi n eral s) anal ysi s (see Tabl e 7): Alt hough not as si gni fi cant as ot her anal yses , i t showed a posi ti ve rel ati on wit h t he m arket siz e of t he servi ce sect or. In additi on, the i rrel ati veness of t he m arket siz e of t he m ining sect or and FD I i nfl ow s is not abl e. Thi s coul d be ex pl ai ned b y t he domi nance of the publ i c corporat ions t hat are owned b y t he governm ent of Indi a as m ent i oned above.

Tab l e 7. Resou rce - ri ch states (mi n eral s) an al ysi s 概要

回帰統計 重相関 R 重決定 R2 補正 R2 標準誤差 観測数

0.904179 0.817539 0.788918 5603.063 60

分散分析表

自由度 回帰 残差 合計

切片 GDP GDPPC EXPEPC HL HD GDPS GDPM TEL

変動

分散 観 測された分散比 有意 F

8 7.17E+09 8.97E+08 51 1.6E+09 31394309 59 8.78E+09

係数

標準誤差

-8177.47 -0.05278 919687.5 -7.5E+07 0.555429 -2701.93 0.170465 -0.03725 -28.5784

5134.316 0.020136 578333.4 1.39E+08 0.178456 4925.482 0.044727 0.369507 63.49682

t -1.59271 -2.62138 1.590238 -0.53693 3.112407 -0.54856 3.811221 -0.10081 -0.45008

28.564

2.8E-16

P-値 下限 95% 上限 95%下限 95.0%上限 95.0% 0.117406 -18485 2130.103 -18485 2130.103 0.011514 -0.09321 -0.01236 -0.09321 -0.01236 0.117962 -241365 2080740 -241365 2080740 0.593648 -3.5E+08 2.04E+08 -3.5E+08 2.04E+08 0.003039 0.197163 0.913695 0.197163 0.913695 0.5857 -12590.2 7186.388 -12590.2 7186.388 0.000374 0.080672 0.260259 0.080672 0.260259 0.920096 -0.77907 0.704566 -0.77907 0.704566 0.654562 -156.054 98.89675 -156.054 98.89675

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Resou rce-ri ch states (natu ral gas) an al ysis (see Tabl e 8): It is rem arkabl e t hat t he amount of nat ural gas produced had a posit ive rel at ion wi th FD I i nfl ows. As m ent ioned above, it coul d be consi dered that m an y forei gn e nt erpri ses focus on t he resource.

Tab l e 8. Resou rce - ri ch states (natu ral gas) an alysi s

概要 回帰統計 重相関 R 0.875855 重決定 R2 0.767121 補正 R2 0.662326 標準誤差 2238.099 観測数 30 分散分析表 自由度 回帰 9 残差 20 合計 29

切片 GDP GDPPC EXPEPC HL HD GDPS GDPM TEL NGP

変動 分散 観 測された分散比 有意 F 3.3E+08 36667432 7.320181 0.000112 1E+08 5009088 4.3E+08

係数 標準誤差 12755.51 8286.098 0.010354 0.02452 -4307819 1884072 1.35E+08 2.63E+08 -0.29078 0.361281 -6335.9 6423.39 0.024512 0.042935 -1.01678 0.568808 257.5252 75.13689 8.823731 2.903508

t 1.539386 0.422286 -2.28644 0.513456 -0.80485 -0.98638 0.57092 -1.78756 3.427413 3.038989

P-値 下限 95% 上限 95%下限 95.0%上限 95.0% 0.139383 -4528.99 30040 -4528.99 30040 0.677321 -0.04079 0.061502 -0.04079 0.061502 0.033268 -8237925 -377713 -8237925 -377713 0.613258 -4.1E+08 6.82E+08 -4.1E+08 6.82E+08 0.430371 -1.04439 0.462841 -1.04439 0.462841 0.335731 -19734.9 7063.059 -19734.9 7063.059 0.574414 -0.06505 0.114072 -0.06505 0.114072 0.089012 -2.20329 0.169735 -2.20329 0.169735 0.002667 100.7923 414.258 100.7923 414.258 0.006481 2.767119 14.88034 2.767119 14.88034

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BJP ad min istratin g regi on s (see Tabl e 9): Al though t he hi ghwa y l engt h and the m arket siz e of t he servi ce sect or showed a posi ti ve rel at ion, it di d not show ot her not abl e resul ts. It coul d be concl uded t hat furt her st at e-wi se research of t he rel at i on bet ween st at e part i es’ FD I pol i c y and FD I i nflows are requi red.

Tab l e 9. B JP ad mi n istrati ng regi on s 概要 回帰統計 重相関 R 0.762284 重決定 R2 0.581077 補正 R2 0.456952 標準誤差 1762.957 観測数 36 分散分析表 自由度 変動 分散 観 測された分散比 有意 F 回帰 8 1.16E+08 14549800 4.681374 0.001118 残差 27 83916513 3108019 合計 35 2E+08

切片 GDP GDPPC EXPEPC HL HD GDPS GDPM TEL

係数 標準誤差 -1241.84 3187.715 0.001462 0.018272 -190159 327099.6 -2.5E+07 67562730 0.364747 0.165072 4290.464 2092.354 -0.02613 0.064145 -0.29328 0.301933 23.74351 35.51199

t -0.38957 0.079987 -0.58135 -0.36504 2.20963 2.050544 -0.40731 -0.97132 0.668605

P-値 下限 95% 上限 95%下限 95.0%上限 95.0% 0.699909 -7782.49 5298.809 -7782.49 5298.809 0.936838 -0.03603 0.038953 -0.03603 0.038953 0.565827 -861312 480993.7 -861312 480993.7 0.717922 -1.6E+08 1.14E+08 -1.6E+08 1.14E+08 0.035797 0.026048 0.703446 0.026048 0.703446 0.050134 -2.69138 8583.618 -2.69138 8583.618 0.68699 -0.15774 0.105487 -0.15774 0.105487 0.340008 -0.91279 0.32624 -0.91279 0.32624 0.509424 -49.1211 96.60811 -49.1211 96.60811

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State ow n ed en terp rises (SO Es) abu nd an t regi on s (see Tabl e 10): Thi s anal ys i s did not have an y rem arkabl e result s com pared to ot her anal yses . Furt her st ud y i s requi red on t he rel ati on bet ween S OEs and forei gn ent erprises.

Tab l e 10. S tate own ed en terp rises (SO Es) abun dan t regions 概要

回帰統計 重相関 R 0.919616 重決定 R2 0.845693 補正 R2 0.81826 標準誤差 5502.25 観測数 54 分散分析表

自由度 回帰 残差 合計

切片 GDP GDPPC EXPEPC HL HD GDPS GDPM TEL

変動

分散 観 測された分散比 有意 F

8 7.47E+09 9.33E+08 30.82824 45 1.36E+09 30274754 53 8.83E+09

係数

標準誤差

-6133.82 -0.07944 765905.3 1.4E+08 0.824847 -12022.7 0.216721 0.015683 42.2738

3654.51 0.022328 1097211 2.29E+08 0.174912 5118.663 0.052934 0.196598 96.38442

t -1.67843 -3.55774 0.698047 0.611753 4.715792 -2.34879 4.094183 0.079771 0.438596

8.3E-16

P-値 下限 95% 上限 95%下限 95.0%上限 95.0% 0.100196 -13494.4 1226.737 -13494.4 1226.737 0.000895 -0.12441 -0.03447 -0.12441 -0.03447 0.488739 -1443992 2975803 -1443992 2975803 0.54378 -3.2E+08 6E+08 -3.2E+08 6E+08 2.35E-05 0.472557 1.177137 0.472557 1.177137 0.023286 -22332.2 -1713.15 -22332.2 -1713.15 0.000174 0.110107 0.323335 0.110107 0.323335 0.936773 -0.38029 0.411652 -0.38029 0.411652 0.663053 -151.854 236.402 -151.854 236.402

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5. Conclusion The purpose of t hi s st ud y was to ex am i ne t he det ermi nant s of i nward FD I i n Indi a regi on and sect or wi sel y, by re gressi on anal ysi s. The FD I dat a consists of 24 st at e and Uni on Terri tori es, i n t he peri od of 2008 2013. In t he m odel t here were ni ne expl anat or y vari abl es. The y are, respect ivel y, GDP , GDP per capit a, expendit ure on educat ion per capi t a , l engt h of st at e and nati onal hi ghwa ys , hi ghwa y densi t y, GDP of servi ce s ect or , GDP of m ini ng and quarr yi ng se ctor, n umber of t el ephones per 100 popul ati ons , and a m ount of nat ural gas produced .

The resul ts of the anal ysi s show that generall y FD I i n Indi a i s rel at ed posi ti vel y wi th GDP per capit a, l engt h of st at e and nati onal hi ghwa ys, GDP of servi ce sect or, num ber of t el ephones per 100 popul ati ons, and am ount of na t ural gas produced . Especi al l y t he resul ts reveal ed t hat the FD I i nfl ows have a si gni fi cant rel ati on wit h t he m arket siz e of t he servi ce sector of t he i ni ti al year.

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6. References Vani Archana, N.C .Na yak & P. Basu (2014), “ Im pact of FD I i n Indi a: St at e-Wi se Anal ysi s i n an Econom i c Fram ework” Ashok Kundra (2009), “ Indi a-C hi na a Comparati ve Anal ysi s of FD I Pol i c y and P erform ance ” Muhamm ad Az am , Ling Lukm an (2010) , “Det erm inants of Forei gn Di rect Invest m ent i n Indi a, Indonesi a and P aki st an: A Quant it ati ve Approach” Đsm ail Ç evi s and Burak Ç am urdan (2007), “The Economi c Det erm inant s of Forei gn Di rect Investm ent in Devel oping C ount ri es and Transit i on Econom i es” Di panj an R o y C haudhur y (2014) , “ Indi a, Japan Si gn Ke y Agr eem ent s; t o Share ‘S peci al S t rat egi c Gl obal P art nershi p’”

The Economi c Tim es,

Sept em ber 2, 2014 El ecti on C om mi ssion of Indi a (2014), “General El ecti on t o Loksabha Trend and R esul t 2014”. 16 Ma y 2014 M art in Fel dst ei n (2000 ), “As pects of Gl obal Econom i c Int egr ati on: Out look for t he Fut ure,” NBER W orking Paper No. 7899 (C ambridge, M as s achusett s: Nat i onal Bureau of Econom i c R esearch)

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Governm ent of Indi a (20 14), “C onsoli dat ed FD I P oli c y” [C hapt er -1, 1.1, 1.1 .1] (Effecti ve from Apri l 17, 2014) IM F (1993), “Bal ance of P a ym ent s Manual : Fi fth Edi ti on (BPM5)” J un & Brewer (1997) , “The R ol e of Fore i gn C api t al Flows i n S ust ai nabl e Devel opm ent ” J ETRO (2007), “ Ind i a St at es Abst ract ” Prakash Loungani and Assaf (2001), “How Benefi ci al Is Forei gn Di rect Inves tm ent for Developi ng C ount ri es? ( IMF) Fi nance & Developm ent ” UR L: ht t p: // www.im f.org/ ex t ernal /pubs/ ft/ fandd/2001/ 06/l oungani.htm Mohi t a Ma ggon (2012), “Econom i c and Pol i c y Det erm i nant s of Forei gn Di rect Invest m ent : An Empi ri cal Anal ysi s i n Cont ext of Indi a” Bhav ya Malhot ra (2014) , “Forei gn Di rect Investm ent: Im pact on Indi an Econom y”, p. 18 Im ad A. Moosa (2002) , “Forei gn Di rect Investm ent Th eor y, Evi dence and P ract i ce” Im ad A. Moosa, Bul y A. C ardak (2006) , “The Det erm i nants of Forei gn Di rect Invest m ent : An Ext rem e Bounds Anal ysi s” OEC D (1996), “Det a il ed Benchm ark Defi ni ti on of Forei gn Di rect Inves tm ent : Thi rd Edi ti on (BD3)”

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OEC D (2001), S NA 1.128 and 2.173 -2.174 OEC D (2002), “Forei gn Di rect Investm ent for Developm ent ” OEC D (2008) , “OEC D Gl ossar y of S t at isti cal Terms” K.S . Chal apat i R ao, Biswaji t Dhar (2011), “ Indi a`s FD I Infl o ws Trends ” and Concept s UNC TAD (1999), “Forei gn Di rect Invest m ent ” UNC TAD (2002), “Worl d Invest m ent R eport 2002 Transnat ional Corporat ions and Ex port C om pet it i veness” UNC TAD (2013), “ IIA Issues Not e No. 3” UNC TAD (2014), “Gl obal Investm ent Trends Moni tor No. 15”

Nara yanam urt h y Vi j a yakum ar, P erum al Sridharan, Kode C handra Sekhara R ao (2010) , “Det ermi nant s of FD I i n BR IC S C ount ri es: A panel anal ys i s” Worl d Bank (2014), “Doi ng Busi ness 2015 Ec onom y P rofi l e 2015 Indi a”

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