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Foreign Direct Investment and Poverty Reduction

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  • Manmohan Agarwal
  • Pragya Atri
  • Srikanta Kundu

Abstract

It is widely proclaimed that capital account liberalization would immensely benefit developing economies because once capital controls are lifted, developing economies create a potential for movement of capital. And, this free movement of capital could possibly increase growth thereby lifting millions out of poverty. India has been gradually liberalizing since the 1980s and throughout more capital inflows were observed compared to outflows. Also, the composition of capital flows has been changing since the 1980s–with Foreign Direct Investment (FDI) inflows rising steadily post-1991compared to portfolio and debt flows. However, since 2000, FDI outflows from India were also witnessed. In this paper we empirically test the impact of FDI flows on poverty in India for 1980–2011. To provide a correct perspective to India’s performance we also analyze the link between FDI flows and poverty for SAARC countries. For a better understanding of how FDI flows impact poverty, we analyze the outflows and inflows separately. The results show both similarities and contrasts in the behaviour of India in comparison with the other SAARC countries.

Suggested Citation

  • Manmohan Agarwal & Pragya Atri & Srikanta Kundu, 2017. "Foreign Direct Investment and Poverty Reduction," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(2), pages 135-157, September.
    • Handle: RePEc:sae:soueco:v:18:y:2017:i:2:p:135-157
    DOI: 10.1177/1391561417713129
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    5. Dhrifi, Abdelhafidh & Jaziri, Raouf & Alnahdi, Saleh, 2020. "Does foreign direct investment and environmental degradation matter for poverty? Evidence from developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 13-21.
    6. Sodiq Arogundade & Mduduzi Biyase & Santos Bila, 2022. "Be Nice to Thy Neighbors: Spatial Impact of Foreign Direct Investment on Poverty in Africa," Economies, MDPI, vol. 10(6), pages 1-20, June.
    7. Quynh Anh Do & Quoc Hoi Le & Thanh Duong Nguyen & Van Anh Vu & Lan Huong Tran & Cuc Thi Thu Nguyen, 2021. "Spatial Impact of Foreign Direct Investment on Poverty Reduction in Vietnam," JRFM, MDPI, vol. 14(7), pages 1-16, June.
    8. James Temitope Dada & Taiwo Akinlo, 2021. "Foreign direct investment and poverty reduction in sub-Saharan Africa: does environmental degradation matter?," Future Business Journal, Springer, vol. 7(1), pages 1-10, December.
    9. Kunofiwa TSAURAI, 2018. "Investigating The Impact Of Foreign Direct Investment On Poverty Reduction Efforts In Africa," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 27(2), pages 139-154.
    10. Taiwo Akinlo & James Temitope Dada, 2021. "The moderating effect of foreign direct investment on environmental degradation-poverty reduction nexus: evidence from sub-Saharan African countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(11), pages 15764-15784, November.
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    More about this item

    Keywords

    Foreign direct investment; poverty; SAARC countries; India;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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