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Foreign Direct Investment In Post-Reform India: Likely To Work Wonders For Regional Development?

  • Peter Nunnenkamp

    ()

    (Kiel Institute for the World Economy)

  • Rudi Stracke

    ()

    (University of St. Gallen)

We make use of a new and detailed database on FDI approvals since the early 1990s to address two major issues related to FDI and regional development in India in the post-reform period. First, we analyze the location choices of foreign investors. The evidence indicates that the concentration of FDI in a few relatively advanced regions may have prevented FDI effects from spreading across the Indian economy. Second, we evaluate whether the link between FDI and economic growth has become stronger in the aftermath of reforms. Various categories of FDI are indeed positively correlated with per-capita income growth across Indian states. However, it is only for the richer states that FDI appears to be associated with higher growth. FDI is thus likely to increase regional income disparity in India.

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Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal of Economic Development.

Volume (Year): 33 (2008)
Issue (Month): 2 (December)
Pages: 55-84

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Handle: RePEc:jed:journl:v:33:y:2008:i:2:p:55-84
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  1. Nirvikar Singh & T.N. Srinivasan, 2004. "Indian Federalism, Economic Reform and Globalization," Public Economics 0412007, EconWPA.
  2. David Mayer-Foulkes & Peter Nunnenkamp, 2005. "Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI," DEGIT Conference Papers c010_045, DEGIT, Dynamics, Economic Growth, and International Trade.
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  7. Patricio Aroca & William F. Maloney, 2005. "Migration, Trade, and Foreign Direct Investment in Mexico," World Bank Economic Review, World Bank Group, vol. 19(3), pages 449-472.
  8. Theodore H. Moran & Edward M. Graham & Magnus Blomstrom, 2005. "Does Foreign Direct Investment Promote Development?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3810.
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  10. Chandana Chakraborty & Parantap Basu, 2002. "Foreign direct investment and growth in India: a cointegration approach," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1061-1073.
  11. Nagesh Kumar, 2000. "Explaining the geography and depth of international production: The case of US and Japanese multinational enterprises," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 442-477, 09.
  12. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
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