Foreign Direct Investment: Governance and Infrastructure - A Study Across Indian States

Abstract

This paper ascertained the pattern of FDI distribution across Indian states for the period from 1991-2013. FDI is unevenly distributed in India. The paper further located the factors that effect FDI inflows. An infrastructure and governance index was constructed, and regression analysis was done to analyze the effects of these variables on FDI inflows. Infrastructure, governance, size of the market, and market growth together explained significant variation in FDI distribution. Therefore, the governments at the Centre and State levels need to put in consistent efforts - by improving the physical and human infrastructure as well as governance in states - to attract FDI.