INEQUALITY AMONG NEIGHBORS: UNDERSTANDING FOREIGN DIRECT INVESTMENT AS A FUNCTION OF REGIONAL DETERMINISM WITHIN INDIA
Inequality Among Neighbors: Understanding Foreign Direct Investment as a Function of Regional Determinism within India Ritija Gupta, B.A. Thesis Advisor: Sencer Ecer, PhD. Since 1991, India's period of economic liberalization has catapulted the country into international limelight as a rapidly growing emerging market with much economic potential. Most of this story begins with foreign direct investment (FDI), a strategy that has imbued India's once stagnant industrial sector with capital and job opportunity. However, as the world grapples with rising inequities between wealthy and poor countries, as India's GDP grows ever larger, there is a concern that the growth within the country is not evenly distributed and may in fact exacerbate current economic disparities. This paper seeks to look at potential avenues poorer states can take to attract FDI if they choose to as a method to stay competitive within the country. Our hypothesis was that measures such as power rating (as a proxy for infrastructure), literacy, and minimum wage would be highly significant related to the dependent variable of FDI dollars. Two main regressions series were conducted with FDI dollars as a dependent variable and growth rate of FDI dollars as a dependent variable. While our growth rate regression series were not statistically significant, the pooled regressions used to study FDI dollars as the dependent variable were statistically significant at. Some interesting outcomes resulted, such as an unexpectedly inverse relationship between power rating and FDI dollars which is explained by an interesting policy measure on the part of poorer states. However, overall the results indicated that an increase in infrastructure aimed at Multinational Enterprises (MNEs) would likely promote an increase in FDI dollars.
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