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Foreign Direct Investment in Post-Reform India: Likely to Work Wonders for Regional Development?

  • Peter Nunnenkamp
  • Rudi Stracke

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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File URL: https://www.ifw-members.ifw-kiel.de/publications/foreign-direct-investment-in-post-reform-india-likely-to-work-wonders-for-regional-development-1/kap1375.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1375.

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Length: 29 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:kie:kieliw:1375
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  3. Kumar, Nagesh & Aggarwal, Aradhna, 2005. "Liberalization, outward orientation and in-house R&D activity of multinational and local firms: A quantitative exploration for Indian manufacturing," Research Policy, Elsevier, vol. 34(4), pages 441-460, May.
  4. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
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  15. 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.
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  17. Nirvikar Singh & T.N. Srinivasan, 2004. "Indian Federalism, Economic Reform and Globalization," Public Economics 0412007, EconWPA.
  18. 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;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(3), pages 442-477, 09.
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