OVERSEAS DIRECT INVESTMENT- A STUDY ON GUARANTEE TO THE WOS AND ITS ASSOCIATION WITH THE INDIAN MACROECONOMIC FACTORS

Abstract

This research has been undertaken to analyze the Indian macroeconomic factors that have to be scrutinized before investing in an overseas establishment in the form of guarantee. The Reserve Bank of India has been publishing the data on Overseas Direct Investments from India in the form of Joint venture(JV)and Wholly Owned Subsidiary (WOS) since July 2007. The investments from India to the WOS are made in the form of equity, loan and guarantee. This study considers the guarantee investments only. The descriptive statistics has been employed to analyze the performance of the guarantee ODI. The Granger Causality Test and Johansen Cointegration test have been employed to estimate the short run and long run association between guarantee ODI and the Indian macroeconomic factors. The results of the study have shown that the investments in the form of the guarantee have a short run association with trade openness and inward FDI respectively. There is no long run association between guarantee and the macro economic factors of India.