V3I1P51

A Study of the Effect of Tax Reforms on Foreign Direct Investment (FDI) in India

Geetanjali A Naik^1*, Suraj Inamati², Tharun J³

Abstract

Tax reforms play a crucial role in shaping a country’s investment climate, especially for foreign investors seeking stability, transparency, and long-term profitability. In the Indian context, a series of tax reforms over the past decade—such as the introduction of the Goods and Services Tax (GST), reduction in corporate tax rates, and measures aimed at improving ease of doing business—have significantly altered the framework governing foreign direct investment (FDI). This study examines the effect of these tax reforms on FDI inflows into India by analysing trends before and after major policy changes. Using secondary data sourced from government publications, international databases, and economic reports, the study evaluates whether tax reforms have contributed to increased investor confidence and sustained foreign investment. The findings suggest that rationalisation of tax structures and policy clarity have positively influenced FDI inflows, although other macroeconomic factors also play a supporting role. The study highlights the importance of consistent and investor-friendly tax policies in strengthening India’s position as a preferred investment destination.

Keywords:

Foreign Direct Investment (FDI), Tax Reforms, Corporate Tax, Goods and Services Tax (GST), Investment Climate, Indian Economy