The Dubious Relationship Between Make in India and Foreign Direct Investment: The Story So Far and the Road Ahead

Aishwarya Nagpal and Megha Jain

Paradigm, 2019, vol. 23, issue 1, 98-115

Abstract: Campaigns like ‘Make in India’ (MII) rely on inviting foreign direct investment (FDI) into India to garner the benefits of spillover effects, although the pieces of evidence so far confirm the opposite due to the weak targeting of the factors determining FDI transfers. Thus, the current study explores the key components that shall be sufficiently pursued in order to assign relevance to such governmental campaigns and foreign capital movement for the future capacity building. In order to determine the same, the present study addresses it descriptively by a non-econometric study based on correlation and linkage with key components like manufacturing Purchasing Managers’ Index, employment creation, Index of Industrial Production and FDI restrictiveness index and empirically by applying the Granger causality tests (post unit root stationarity conversion) between the key factors of FDI and FDI inflows in India from 2000 to 2016 (from the eclectic paradigm of OLI [Ownership, Location and Internalization] factors) in the light of the MII campaign. The result indicates that the ease of doing business, gross domestic product growth rate and exchange rate volatility are the prime factors contributing to the inflow of FDI in India. Therefore, the think-tanks will need to draft such a policy framework that enables the required boosting of these key elements to make campaigns like MII really promising in the Indian context. The same could be harnessed through the promotion of greenfield investments, adequate infrastructure, improved governance, tax reforms, rationalizing land and labour reforms, etc.

Keywords: Make in India; manufacturing sector; foreign direct investment; eclectic paradigm; ease of doing business; exchange volatility (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:padigm:v:23:y:2019:i:1:p:98-115

DOI: 10.1177/0971890719844592

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