FDI& economic growth (original) (raw)
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Foreign direct investment and growth in India: a cointegration approach
The two-way link between foreign direct investment and growth for India is explored using a structural cointegration model with vector error correction mechanism. The existence of two cointegrating vectors between GDP, FDI, the unit labour cost and the share of import duty in tax revenue is found, which captures the long run relationship between FDI and GDP. A parsimonious vector error correction model (VECM) is then estimated to ®nd the short run dynamics of FDI and growth. Our VECM model reveals three important features: (a) GDP in India is not Granger caused by FDI; the causality runs more from GDP to FDI; (b) trade liberalization policy of the Indian government had some positive short run impact on the FDĪ ow; and (c) FDI tends to lower the unit labour cost suggesting that FDI in India is labour displacing.
Impact of Foreign Direct Investment on Economic Growth of India
International Journal of Scientific Research and Management, 2021
International capital flows have a significant role for growth and development of recipient countries by providing necessary capital, resources and technology. One aspect of such international investment is Foreign Direct Investment (FDI) which has become an important source of external finance since they are considered as more stable and prominent source of capital inflows. The present study has been conducted to evaluate long-run and short-run impact of FDI on economic growth of India. Gross Domestic Product (GDP) has been considered as indicator of economic growth for this study. The empirical analysis has been conducted using Autoregressive Distributed Lag Approach (ARDL) of Cointegration. The period of study was 1991-92 to 2018-19. The findings of the study indicate presence of long-run relationship between FDI and economic growth of India. The study concludes that Foreign Direct Investment helps to enhance economic growth of India.
Does Foreign Direct Investment Lead Economic Growth in India
This paper investigates the causal relations between foreign direct investment and economic growth in a developing country like India. The analysis has been made under Johansen's Cointegration framework based on 21 years of data covering the post reform era of the country. The Cointegration analysis finds strong positive relation between FDI and economic growth in India. The study concludes with a suggestion that the policy makers in India should develop investor friendly environment conducive for attracting more amount of capital from the developed world.
Impact of FDI on Economic Growth: A Time Series Analysis of Indian Economy Since 1991
Strad Research; ISSN: 0039-2049; VOLUME 8, ISSUE 10, 2021, 2021
Foreign direct investment (FDI) consider as a component of investment is needed by India to achieve the economic reforms and maintains the speed of the growth of the economy. The inflow of FDI in India initially was low due to regulatory policy framework but there is a sharp rise in investment flows from 2005 towards because of the new policy has broadened. The relationship between FDI and economic growth in host nation remain the main question in economic literature and mainly for the countries which are suffering from the unemployment problems and lack of new technological progress. This article analyses the linkage between FDI and economic growth using simple OLS and ARDL model of long run and short run relationship from the period 1991 to 2017. We use OLS technique to find out the relationship between FDI and economic growth and the ARDL technique to check the long run relationship between the variables. The empirical results confirm that there strong relationship exist between the variables. The ARDL results also confirm the existence of the long run co-integration between FDI and economic growth. The finding shows that the stock of the FDI is a significant factor for the economic growth for Indian economy.
Impact of Foreign Direct Investment on macro Economic Parameters of India: AN empirical analysis
, which leads to the globalization of an economy. The globalization over the last two decades has been hailed as a major development, which result in economic prosperity in developing countries. The present study analyses the impact of FDI on some macroeconomic indicators in India. Explanatory variables used in the study are Gross Domestic Product (GDP), Foreign Exchange Reserves (RES), Gross Capital formation (GCF), Exports (EXP), Employment (EMP). The technique of Cointegration has been applied to investigate the impact of FDI on the economy of India. Augmented Dickey Fuller (ADF) test and Philip Parron test have also been applied to check the stationarity of data series. Empirical analysis concludes positive and significant impact of FDI on GDP, GCF, EXP, EMP and RES. The value of X coefficient shows a trend from 0.065to 0.634 in India. The minimum variation due to FDI is found out in case of EMP (0.065%) and maximum in Reserves (0.634%).
Nexus Between Domestic Investment, FDI and Economic Growth: Empirical Evidence from India
2016
This paper examines the impact of Domestic Investment and Foreign Direct Investment (FDI) on economic growth of India for the period 1980-2013 by employing the Vector Error Correction Model (VECM) methodology. Domestic Investment was broken down into Private investment and Public Investment. The Augmented Dickey Fuller (ADF) test for unit root, Johansen Cointegration test, VECM, Short run Causality and Impulse Response Function (IRF) were the tools of analysis employed by the study. ADF test for unit root result shows all variables to be integrated of order one I (1), i.e. they became stationary after taking first difference. Johansen Cointegration Trace and Max-Eigen Value test shows the presence of cointegration (long run relationship) among the variables. Normalised long run estimates showed Private Domestic Investment and FDI to have a positive and significant relationship with economic growth. The relationship between Labour and economic growth was positive, though statisticall...
A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth for India
This study investigates the relationship between Trade, Foreign Direct Investment (FDI) and economic growth for India over the period 1970-2007. The literature on foreign direct investment (FDI) Trade and economic growth generally points to a positive Trade and FDI-Growth relationship. However, very few studies offer direct tests of causality the three variables. In theory, economic growth may induce FDI inflow, Trade and FDI may also stimulate economic growth. This paper adds to the literature by analyzing the existence and nature of these causal relationships. The present analysis focuses on India, where growth of FDI has been the most pronounced. The Cointegration analysis suggested that there is a long-run equilibrium relationship. The results of Granger causality test showed that there is a causal relationship between the examined variables. Economic growth, trade and FDI appear to be mutually reinforcing under the open-door policy.
Foreign Direct Investment and Economic Growth: Evidence from India
2015
Foreign direct investment in India has played a significant role in the development of the Indian economy. FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. As a developmental tool, it plays an important role in the long-term development of a country not only as a source of capital but also for enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities. India after liberalizing and globalizing the economy to the outside world in 1991, there was a massive increase in the flow of foreign direct investment due to economic stability of the country. So, this paper have made an attempt to probe bidirectional relationship empirically between the foreign direct investment and economic growth in context of India and it is found that Gross Domestic Product causes Foreign Direct Investment which reveals t...
International Journal of Management , 2020
The study aims to analyze the importance of economic growth that has more relevance than Foreign Direct Investment (FDI) inflow for a stable development in India. The article takes the period of 1978 to 2019 to analyze the same. It applies Auto Regressive Distributed Lag Modelling Approach to find out the impact of economic growth. It is proved that there is a cointegration between FDI and economic growth in long run. In short run, both economic growth and FDI granger cause each other. Also, there exists a negative effect of FDI on economic growth in short run. Hence, the study recommends a threefold development process in India. The policy makers are suggested aligning the economic policies in a way to focus at the first stage only on economic growth which will bring FDI in India. At the second stage, they need to find relevant macroeconomic variables that will be positively influenced by FDI so that, at the third stage, these variables will ultimately contribute to growth of Indian economy.
Role of Foreign Direct Investment in the Economic Development of India
Tij S Research Journal of Economics Business Studies Rjebs, 2014
FDI refers to capital inflows from abroad that are invested in or to enhance the production capacity of the economy. Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. It has in lot of ways facilitated India to achieve a certain degree of financial stability, growth and development. The objective of the paper is to empirically analyse how FDI is stimulating the economic growth. This paper investigates the causal relations between foreign direct investment and economic growth in a developing country like India. The analysis has been made under Johansen's Co integration framework based on 21 years of data covering the post reform era of the country. The Co integration analysis finds strong positive relation between FDI and economic growth in India. The study concludes with a suggestion that the policy makers in India should extend investor friendly environment which is conducive for attracting more amount of capital from the developed world. JEL Classification: F23 F43 C23