Title: Sectoral optimisation of India's foreign direct investment inflows - does it support economic development?

Authors: D.K. Malhotra; Faraji Kasidi; Rahul Singh; G.N. Patel

Addresses: School of Business Administration, Philadelphia University, Philadelphia, PA 19144, USA ' Institute of Accountancy Arusha, Arusha, Tanzania ' Birla Institute of Management and Technology, Greater Noida, UP 201306, India ' Birla Institute of Management and Technology, Greater Noida, UP 201306, India

Abstract: Due to insufficient domestic savings, emerging market policy makers look to foreign direct investment (FDI) to increase investment and capital formation. Irving Fisher (1930s) argued that economy without money stagnates; so if flow of money slows down in domestic market it needs policy initiatives from policy makers to attract FDI. The study seeks to put forth mathematical arguments for optimising foreign direct investment (FDI) inflows to emerging market economies in the context of India. We use primal and dual linear programming techniques with regard to the sectoral FDI inflows to India for the period 2002-2010. The study shows that FDI inflows during the period are not optimally utilised and, consequentially, require intervention for improving its optimal solutions potentials.

Keywords: foreign direct investment; capital allocation; variance-covariance matrix; VCM; optimisation models; data envelopment analysis; DEA; India; FDI inflows; economic policy; sectoral optimisation; economic development; emerging markets; linear programming.

DOI: 10.1504/IJBISE.2016.081600

International Journal of Business Intelligence and Systems Engineering, 2016 Vol.1 No.1, pp.99 - 120

Received: 10 Jul 2015
Accepted: 08 Mar 2016
Published online: 17 Jan 2017 *