International Journal of Applied Research
Vol. 2, Issue 3, Part J (2016)
Impact of exchange rate on FDI: A comparative study of India and China
India and China are the emerging economies in the world. These two countries have about 37.5 percent population of the World. This study was conducted to examine the impact of exchange rate on foreign direct investment in India and China. For analyzing impact of exchange rate on FDI the correlation and regression analysis techniques have been used. It observed that the during 1991 to 2014 foreign direct investment in India increased by 458.89 times in absolute terms whereas, the FDI in China increased by 29.43 times in absolute terms during the same period. The exchange rate shows the 2.68 times decrease in value of Indian rupee in terms of US dollar and 1.15 times decrease in Chinas Yuan in term of US dollar during the study period. It is found that there is positive correlation between FDI and exchange rate in India. For China the correlation between FDI and exchange rate is negative. It is observed that one unit increase in exchange rate will raise FDI by 0.605 units in India. In case of China one unit increase in exchange rate will leads to decrease of FDI by 0.2503 units during the study period. The P value 0.0017 indicates that the coefficient of exchange rate variable is highly significant with FDI in case India. The P value 0.238 indicates that the exchange rate variable does not exert significant influence of FDI in case of China.
How to cite this article:
Dr. VB Khandare. Impact of exchange rate on FDI: A comparative study of India and China. Int J Appl Res 2016;2(3):599-602.