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Economic Growth In India: "Does Foreign Direct Investment Inflow Matter?"

Author

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  • DUKHABANDHU SAHOO

    (Economics Unit, Institute for Social and Economic Change, Nagarbhavi, Bangalore-72, India)

  • MAATHAI K. MATHIYAZHAGAN

    (Economics Unit, Institute for Social and Economic Change Nagarbhavi, Bangalore-72, India)

Abstract

The main objective of this paper is to examine the role of Foreign Direct Investment (FDI) in promoting the growth of the economy via export promotion by using the annual data from 1979–80 to 2000–01. This study uses the Johansen co-integration test and the results demonstrate that there is a long run relationship between Gross Domestic Product (GDP), FDI and Export (EX). The same relationship is also established when the Index of Industrial Production (IIP) replaces GDP. However, the positive elasticity coefficients between FDI, GDP and FDI, IIP are less than the positive elasticity coefficient between EX, GDP and EX, IIP. It implies that EX plays a comparatively better role in the growth of the Indian economy than FDI. Thus, on the eve of India's plan for further opening up of the economy, it is advisable to open up the export-oriented sectors so that a higher growth of the economy can be achieved through the growth of these sectors.

Suggested Citation

  • Dukhabandhu Sahoo & Maathai K. Mathiyazhagan, 2003. "Economic Growth In India: "Does Foreign Direct Investment Inflow Matter?"," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 48(02), pages 151-171.
    • Handle: RePEc:wsi:serxxx:v:48:y:2003:i:02:n:s0217590803000748
    DOI: 10.1142/S0217590803000748
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    Cited by:

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    2. Peter Nunnenkamp & Rudi Stracke, 2008. "Foreign Direct Investment In Post-Reform India: Likely To Work Wonders For Regional Development?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(2), pages 55-84, December.
    3. Areej Aftab Siddiqui & Deep Parikh, 2018. "Comparative Analysis of Impact of Foreign Direct Investment, Exports and Employment on Growth of Manufacturing Industries in India," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(9), pages 1196-1210, September.
    4. Chakraborty, Chandana & Nunnenkamp, Peter, 2006. "Economic reforms, foreign direct investment and its economic effects in India," Kiel Working Papers 1272, Kiel Institute for the World Economy (IfW Kiel).
    5. Chakraborty, Chandana & Nunnenkamp, Peter, 2008. "Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis," World Development, Elsevier, vol. 36(7), pages 1192-1212, July.
    6. Tang, Chor Foon, 2008. "A re-examination of the role of foreign direct investment and exports in Malaysia's economic growth," MPRA Paper 38536, University Library of Munich, Germany.
    7. Sumit Majumdar, 2009. "Technology transfer by foreign firms and the utilization of competencies within Indian industry," The Journal of Technology Transfer, Springer, vol. 34(1), pages 95-117, February.
    8. Yoon Jung Choi & Jungho Baek, 2017. "Does FDI Really Matter to Economic Growth in India?," Economies, MDPI, vol. 5(2), pages 1-9, June.
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    10. Ghosh, Taniya & Parab, Prashant Mehul, 2021. "Assessing India’s productivity trends and endogenous growth: New evidence from technology, human capital and foreign direct investment," Economic Modelling, Elsevier, vol. 97(C), pages 182-195.
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    12. Shikha Gupta & Nand Kumar, 2022. "Globalization Versus Slowbalization: A Perspective on the Indian Economy," Journal of South Asian Development, , vol. 17(1), pages 84-107, April.
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