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An Empirical Analysis of the Relationship between FDI Inflow and Outflow with the Economic Growth of India

Author

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  • Satyajit Mallick

    (Satyajit Mallick (corresponding author) is a Doctoral Student in the Department of Economics, School of Business and Management Studies, Central University of Haryana, Mohindergarh, Haryana, India. E-mail: satyajitmallick777@gmail.com)

  • Rashmi Tanwar

    (Rashmi Tanwar is an Assistant Professor in the Department of Economics at the School of Business and Management Studies, Central University of Haryana, Mohindergarh, Haryana, India. E-mail: rashmitanwar@cuh.ac.in)

Abstract

This study extensively analyses the relationship between the inflow and outflow of foreign direct investment (FDI) and their impact on India’s economic growth. Utilising secondary data spanning the period 2000 to 2024, the research employs the vector error correction model to rigorously investigate the short-term and long-term dynamics among the relevant economic variables. The findings of the analysis reveal a complex and multifaceted interplay between FDI flows, trade openness, exchange rates, market size, infrastructure development and the overarching economic growth of India. Specifically, the results indicate that FDI inflow exerts a positive influence on India’s gross domestic product (GDP), suggesting its role in stimulating economic expansion. Conversely, the study also finds that FDI outflow has a negative effect on GDP, implying potential implications for domestic capital and investment. JEL Codes: C32, F21, F43, F62, O53

Suggested Citation

  • Satyajit Mallick & Rashmi Tanwar, 2025. "An Empirical Analysis of the Relationship between FDI Inflow and Outflow with the Economic Growth of India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 19(1), pages 90-110, May.
    • Handle: RePEc:sae:mareco:v:19:y:2025:i:1:p:90-110
    DOI: 10.1177/00252921251362673
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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