Dhruv Goyal ’28

WUJUR (2025)

Abstract

Following the economic liberalization led by Shri Manmohan Singh in 1991, India saw a surge in Foreign Direct Investment (FDI), yet its distribution remains highly uneven, with 85% of the $70.9 billion received in 2023 concentrated in just five states. While previous studies emphasize factors like GDP, infrastructure, and human capital, they fail to fully explain this disparity. This study highlights bureaucratic inefficiency as a key determinant, using cross sectional data from 2022 and multiple regression analysis. The results show a statistically significant positive relationship between FDI and corruption cases per 10 lakh individuals (coefficient: 2439.607, p < 0.1), suggesting that corruption enables investment by helping firms bypass bureaucratic red tape. Additionally, infrastructure and inflation negatively impact FDI, while GDP has a strong positive correlation (coefficient: 0.029, p < 0.01). With an R² value of 0.81, the model explains a substantial portion of FDI variation across states. These findings challenge the conventional assumption that corruption deters investment, instead showing its paradoxical role in facilitating FDI in regions with inefficient governance. However, reliance on corruption for economic activity has long-term consequences, reinforcing inefficiencies and limiting equitable development. To attract sustainable investment, policymakers must prioritize governance reforms, streamline approval processes, and strengthen institutional transparency, ensuring FDI flows are driven by economic fundamentals rather than informal practices.

Main

This article is viewable by PDF download.

References

References for this work are viewable by PDF download.

Supplemental material

There is no supplemental material provided by the author(s) for this work.

About this article

Citation (APA)

Goyal, D. (2025). Decoding FDI inequality: The bureaucratic factor in India. The Washington University Journal of Undergraduate Research, 2(2), 16–21.

Author Information

Goyal, Dhruv. Washington University in St. Louis.
Corresponding Author. Send correspondence to d.goyal@wustl.edu.

Additional Information and Declarations

There is no additional information or declarations provided by the author(s).

Peer Review

WUJUR thanks the anonymous Peer Reviewers who contributed to the review of this work.

Rights and Permissions

Individual articles © 2025 by their respective authors. Illustrations and images remain the property of their respective authors or rights holders and are reproduced here with permission or under fair use.

The author(s) may grant certain license permissions to the public.

Copyright © 2025. Washington University Journal of Undergraduate Research. All rights reserved for compilation, design, and editorial content.