Do Institutional Quality and Natural Resources Affect the Outward Foreign Direct Investment of India?

Abstract

The institutional quality and natural resources of the host country are among the essential determinants of outward foreign direct investment (OFDI). The present study is performed to examine the role of the host country’s institutional quality and natural resources on Indian OFDI for the panel of 15 countries concerning the period from 2001 to 2020. The study uses the fixed-effect panel regression model and found that host nations’ political stability, voice and accountability, absence of violence or terrorism, rule of law, and control of corruption attract FDI from India. Further, the government’s efficacy and regulatory quality do not have a considerable impact on Indian OFDI. The study also found that the natural resources of the host nation play an important role in the international diversification of investments made by Indian investors. It is recommended to the government of host nations to strengthen their institutional quality as good-quality institutions add to the growth of entrepreneurship, encourage investment, and therefore stimulate the economic growth of the economy.