Nexus Between Domestic Investment, FDI and Economic Growth: Empirical Evidence from India (original) (raw)
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Foreign direct investment and growth in India: a cointegration approach
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There is evidence that foreign direct investment promotes growth in developing economies. At the same time, economic development also attracts FDI. Further, FDI inflows may also induce investment by national investors. In order to analyse the effect of FDI inflows on economic growth and domestic investment in developing countries, this paper has applied the vector autoregressive model for five Asian countries-India, Malaysia, Pakistan, Sri Lanka and Thailand-for the period 1980-2020. In the VAR framework, the relationship between GDP, FDI, exports, infrastructure and population growth are estimated endogenously by taking two-period lags of each of these variables. The estimated VAR results show that there is a positive impact of FDI on growth in these economies, except Pakistan, and the infrastructure facility is an important factor in attracting FDI. The impact of FDI inflows on domestic investment in India is significantly positive, with a more than twofold increase in investment by national investors.
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.
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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.
The role of FDI in the growth process has been a burning topic of debate in several countries including India. This paper is an attempt to analyze the causal relationship between Foreign Direct Investment (FDI) and economic growth in India and tries to analyze and empirically estimate the effect of FDI on economic growth in India, using the cointegration approach for the period, 1990-91 to2010-11. The empirical analysis on basis of ordinary Least Square Method suggests that there is positive relationship between foreign direct investment(FDI)investment and GDP and vice versa. The unit root test clarified that both economic growth and foreign direct investment were found to be integrated of order one using the Kwiatkowski, Phillips, Schmidt and Shinn (KPSS) test for unit root only. The cointegration test confirmed an existence of long run equilibrium relationship between the two as confirmed by the Johansen cointegration test results. The Granger causality test finally confirmed the presence of uni-directional causality which runs from economic growth to foreign direct investment. The error correction estimates gave evidence that the Error-Correction Term is statistically significant and has a negative sign, which confirms that there isn't any problem in the long-run equilibrium relation between the independent and dependent variables. For FDI to be a noteworthy provider to economic growth, India would do better by focusing on improving infrastructure, human resources, developing local entrepreneurship, creating a stable macroeconomic framework and conditions favourable for productive investments to augment the process of development.
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%).
International Journal of Banking, Risk and Insurance, 10(2), 49-61, 2022
There is evidence that foreign direct investment promotes growth in developing economies. At the same time, economic development attracts FDI. Further, FDI inflows may induce investment by national investors. To analyse the effect of FDI inflows on economic growth and domestic investment in developing countries, this paper has applied the vector autoregressive model for five Asian countries-India, Malaysia, Pakistan, Sri Lanka, and Thailand-for the period 1980-2020. In the VAR framework, the relationship between GDP, FDI, exports, infrastructure, and population growth are estimated endogenously by taking two-period lags of each of these variables. The estimated VAR results show that there is a positive impact of FDI on growth in these economies, except Pakistan, and the infrastructure facility is an important factor for attracting FDI. The impact of FDI inflows on domestic investment in India is significantly positive, with a more-than-twofold increase in investment by the national investors.
Financial Markets, Institutions and Risks (FMIR), 2019
The inwards and outward FDI movement plays an important role in the economic development and growth of any economy. The OFDI have its impact on the home economy based on scale effect, competition effect and knowledge effect. It helps other domestic companies to expand their business and scale of firms by giving them technological and trade benefits. OFDI help the companies to improve efficiency and upgrade production processes. This paper is focusing on the Outward Foreign Direct investment (OFDI) and its linkage with the domestic growth in Indian perspective. It takes in to account various direct and indirect benefits which may spillover to domestic economy. This paper is examining the question whether OFDI is linked to production or it is regarded as a withdrawal of domestic capital. Further it has positive or negative impact on the GDP of the country. On the above question several studies have been conducted in developed countries but not in Indian context. So, this paper is attempting to answer the above question in Indian context. The research methodology for this paper is secondary in nature and the data collected for this paper is taken from the RBI sources. We have taken a period of 10 years from 2007 to 2016. For this paper, we used Augmented Dickey-Fuller (ADF) for testing the stationarity, Eigen value test, Trace test. Further we used the regression analysis in order to check the relationship of GDP and Outward Foreign Direct investment (OFDI). The results of the data analysis explain that there is no significant relationship between the OFDI and domestic economic growth in India. However, the results in case of some firms may not be the same.
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...