A Study of the Determinants of Foreign Direct Investment Inflows into BRICS Economies

Foreign Direct Investment has become sine-quo-non for the economic development of both developed and developing countries. FDI is defined as a non-debt financial capital. FDI is also described as “investment into the business of a country by a company in another country”. The BRICS economies have been identified as some of the fastest growing countries and the engines of the global recovery process which underscores the changed role of these economies. BRICS have the potential to evolve into a powerful economic bloc. This study intends to evaluate the trends and patterns of FDI Inflows into BRICS. The relationship between FDI Inflows and its selected determinants are examined. The study is based on secondary time series data collected for ten years ranging from FY 2005-06 to FY 2014-15. GDP, Financial Position, Exchange rate, Trade openness etc. are the variables taken as the determinants of FDI Inflows. Data is analyzed by using correlation analysis, linear regression analysis and compounded annual growth rate. Significant relationship is found between selected variables and FDI Inflows and these variables are positively correlated. Equations were formulated using the regression analysis and they were found to be good fit to predict the FDI Inflows. Policy makers should make concerted efforts to improve these variables under study which will result in increased foreign capital inflow.