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Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis

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  • Chakraborty, Chandana
  • Nunnenkamp, Peter

Abstract

Summary Booming foreign direct investment (FDI) in post-reform India is widely believed to promote economic growth. We assess this proposition by subjecting industry-specific FDI and output data to Granger causality tests within a panel cointegration framework. It turns out that the growth effects of FDI vary widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing sector, whereas any causal relationship is absent in the primary sector. Most strikingly, we find only transitory effects of FDI on output in the services sector. However, FDI in the services sector appears to have promoted growth in the manufacturing sector through cross-sector spillovers.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 7 (July)
Pages: 1192-1212

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:7:p:1192-1212

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Web page: http://www.elsevier.com/locate/worlddev

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Cited by:
  1. Ranjan Dash & P. Parida, 2013. "FDI, services trade and economic growth in India: empirical evidence on causal links," Empirical Economics, Springer, vol. 45(1), pages 217-238, August.
  2. Angelo Antoci & Paolo Russu & Elisa Ticci, 2011. "Investement inflows and sustainable development in a natural resource-dependent economy," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0311, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
  3. Michael Hübler, 2009. "Energy Saving Technology Diffusion via FDI and Trade: A CGE Model of China," Kiel Working Papers 1479, Kiel Institute for the World Economy.
  4. Giorgia Giovannetti & Elisa Ticci, 2013. "Foreign Direct Investment in Sub-Saharan Africa: Drivers and the Challenge of the Land-Energy Nexus," Working Papers - Economics wp2013_09.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  5. Suyanto & Salim, Ruhul A. & Bloch, Harry, 2009. "Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia," World Development, Elsevier, vol. 37(12), pages 1861-1876, December.
  6. Holger Görg & Verena Lauber & Birgit Meyer & Peter Nunnenkamp, . "Firm Heterogeneity and Choice of Ownership Structure: An Empirical Analysis of German FDI in India," Discussion Papers 08/39, University of Nottingham, GEP.

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