Abstract:
India has one of the largest retail markets in the world. In order to channelize the
huge potential of Indian retail sector and to provide best of the cosmopolitan culture
to the fast-growing Indian retail market and to stimulate India’s FDI inflows, the
Government of India has systematically liberalized FDI in the retail sector since
2006. The present study incorporates retail sector liberalization measures as one of
the institutional changes and tries to empirically examine the impact of institutional
changes on India’s FDI inflows. Along with the conventional determinants of FDI,
extended institutional variable has been incorporated in order to study the inflows
from 21 investing countries for the period 2001-2020. The results were captured by
employing fixed effects, random effects, and GMM (two-step) estimation. The study
suggested a positive and significant coefficient for extended market size, economic
freedom index, and extended institutional variable whereas inflation was found to
have a significant and negative impact on India’s FDI inflows.
