Impact of the US-China Trade War on the FDI’s in India: Zooming into the effects of the FDI Movements in India

Abstract

This paper investigates the substitution effects of the US-China trade war on the FDI inflows and the total repatriation of profit outflows in India. There have been several macroeconomic controls which have been utilised as controls such as effective tax rate, GDP growth rate, reinvestment rate and investments in equity. A quarterly time series dataset from 2011q1 to 2022q3 has been used for the purposes of this study. The findings of this study indicate that there has been significant increase in the rate of FDI inflows in India after the US-China trade war, confirming the presence of the substitution effect on India. The study also reveals that the rate of profit repatriation has not significantly increased, even compared with the growth in rate of FDI inflows. This indicates higher reinvestment rates and a long-term outlook for the FDI inflows into India.