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Empirical study on FDI in Indian Petroleum Sector



Petroleum oil and other products form a major part of our primary energy mix and touch our lives in more ways than one. Also Petroleum sector being a key economic driver for the economic growth influences some of the critical economic variables of any nation. The Indian oil and gas sector is one of the eight core industries in India and has very significant forward linkages with the entire economy. India has been growing at 8-9 per cent annually and is committed to accelerate the growth momentum in the years to come. This would translate into India's energy needs growing many times in the years to come. Hence, there is an emphasized need for wider and more intensive discussion on the trends, structure and development of the industry.
According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted FDI worth US$ 6.67 billion between April 2000 and March 2016. The role of FDI in any industry is to bolster its development and contribute in economic growth. But the question is how well has FDI in petroleum sector in India impacted growth in petroleum industry for India see no reduction in import of Oil and Gas. Nevertheless, India has seen a progressive uptick in infrastructure for refining petroleum products and it homes the largest refinery in the world.
The study explores the investment trends and patterns along with discussing various initiatives taken by the Government of India to promote FDI influx in Oil and Gas sector. Further, a time series data analysis was undertaken to analyse whether there exists any long-run relationship between FDI in petroleum sector, contribution of the sector towards national economic growth and index of industrial production in the petroleum sector, and if so, what is the direction of the relationship. It further discusses the empirical influence of FDI on the capacity of the refining infrastructure currently operating in India. The exploratory research is a combination of quantitative and qualitative analysis. The time series data has been collected through secondary sources. CAGR and Pearson Correlation are the two tools used to assess the growth and relationship between variables.

Keywords: Foreign Direct Investment, Indian Petroleum Sector, Index of Industrial Production, Relation between GDP and FDI, Refining Capacity in India