Federalism and Foreign Direct Investment: How Political Affiliation Determines the Spatial Distribution of FDI – Evidence from India

This paper links the foreign economic engagement of India’s states with the literature on federalism, thereby contributing to an understanding of the political economy of FDI in- flows in a parliamentary federal system. More specifically, it studies subnational govern- ments’ international engagements to attract foreign direct investment (FDI) and investi- gates whether the political affiliations of states’ chief ministers and parliamentarians de- termine the spatial distribution of FDI across the Indian states, correcting for the influence of per capita income, population density, urbanisation, infrastructure, policy regime, and human development. [GIGA Working papers 307/2016].