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    Foreign Direct Investment and Growth in India

    Uploaded by

    Abhinav Katiyar
    The document analyzes the relationship between foreign direct investment (FDI) and economic growth in India using a cointegration model. It finds two cointegrating vectors between GDP, FDI, unit labor costs, and import duty revenue that represent the long-run relationship between FDI and GDP. A vector error correction model shows in the short-run: (1) GDP is not Granger caused by FDI, causality runs more from GDP to FDI; (2) trade liberalization had a positive impact on FDI; and (3) FDI tends to lower unit labor costs, suggesting it replaces labor in India.

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    Foreign Direct Investment and Growth in India

    Uploaded by

    Abhinav Katiyar
    242 views2 pages
    The document analyzes the relationship between foreign direct investment (FDI) and economic growth in India using a cointegration model. It finds two cointegrating vectors between GDP, FDI, unit labor costs, and import duty revenue that represent the long-run relationship between FDI and GDP. A vector error correction model shows in the short-run: (1) GDP is not Granger caused by FDI, causality runs more from GDP to FDI; (2) trade liberalization had a positive impact on FDI; and (3) FDI tends to lower unit labor costs, suggesting it replaces labor in India.

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    The document analyzes the relationship between foreign direct investment (FDI) and economic growth in India using a cointegration model. It finds two cointegrating vectors between GDP, FDI, unit labor costs, and import duty revenue that represent the long-run relationship between FDI and GDP. A vector error correction model shows in the short-run: (1) GDP is not Granger caused by FDI, causality runs more from GDP to FDI; (2) trade liberalization had a positive impact on FDI; and (3) FDI tends to lower unit labor costs, suggesting it replaces labor in India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    242 views2 pages

    Foreign Direct Investment and Growth in India

    Uploaded by

    Abhinav Katiyar
    The document analyzes the relationship between foreign direct investment (FDI) and economic growth in India using a cointegration model. It finds two cointegrating vectors between GDP, FDI, unit labor costs, and import duty revenue that represent the long-run relationship between FDI and GDP. A vector error correction model shows in the short-run: (1) GDP is not Granger caused by FDI, causality runs more from GDP to FDI; (2) trade liberalization had a positive impact on FDI; and (3) FDI tends to lower unit labor costs, suggesting it replaces labor in India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Foreign direct investment and growth in India: a cointegration approach.

    By: Chakraborty, Chandana; Basu, Parantap

    The two-way link between foreign direct investment and growth for India is explored using a structural cointegration
    model with vector error correction mechanism. The existence of two cointegrating vectors between GDP, FDI, the
    unit labour cost and the share of import duty in tax revenue is found, which captures the long run relationship
    between FDI and GDP. A parsimonious vector error correction model (VECM) is then estimated to find the short run
    dynamics of FDI and growth. Our VECM model reveals three important features: (a) GDP in India is not Granger
    caused by FDI; the causality runs more from GDP to FDI; (b) trade liberalization policy of the Indian government had
    some positive short run impact on the FDI flow; and (c) FDI tends to lower the unit labour cost suggesting that FDI
    in India is labour displacing.

    Foreign Direct Investment and Economic Development of India: A


    Diagnostic Study-Shiralashetti, A. S.  [email protected]
    1

    Hugar, S. S.1 [email protected]

    Capital is the life blood of any production and distribution activity, and it plays an important role among the factors of
    production. The need of capital arises not only at the beginning of the venture, but also throughout the life span of
    the venture. However, capital, especially when in short supply, can be the limiting factor for starting, expansion and
    diversification of a venture. In view of the economic crisis on the one hand, and the perceived importance of foreign
    capital in the economic development of the country on the other, the Government of India has been making
    continuous efforts to attract foreign capital during the post-liberalization period. The efforts include providing
    concessions in taxes, announcing tax holidays and increasing the investment cap in various sectors of the Indian
    economy. As a result of the continuous efforts by the Government of India, there has been steady rise in the inflow
    of foreign capital on the one hand, and overall progress in various sectors of the Indian economy on the other.
    According to the Reserve Bank of India (RBI), India has received total Foreign Direct Investment (FDI) inflows of
    $50.1 bn since 1991. There has been tremendous progress in the various sectors of the Indian economy due to the
    inflow of foreign capital. The GDP growth rate has crossed 9% due to boom in manufacturing and service industries.
    Further, the Sensex points in Indian stock market have crossed 19, 000 points on October 15, 2007. In addition, the
    foreign exchange reserves have crossed $204 bn at the beginning of May, 2007. In addition, there has been
    improvement in the employment position, standard of living, infrastructure development, health and hygiene, GDP
    and NDP due to FDI inflows in India. The main objectives of the present study are: 1) To examine the year-wise,
    country-wise, sector-wise and the RBI's region-wise FDI inflows in India, 2) To examine the impact of FDI on the
    growth of GDP and contributions from various sectors of economy towards GDP, 3) To analyze the trends in exports,
    and 4) To examine the impact of FDI on employment position, inflation and stock market of India. The study is
    primarily based on secondary data collected from websites, journals and newspapers. Statistical tools like
    percentage, common size statements and trend analysis are used to analyze the data.

    Foreign Direct Investment in India During the Post-Liberalization


    Period.-- Rameshkumar, S.  [email protected]
    1

    Alagappan, V.1,2  [email protected]

    This paper examines the trends and patterns in the Foreign Direct Investment (FDI) inflows into India during the
    post-liberalization period. The study shows that the actual inflow of the FDI into the Indian economy had maintained
    a fluctuating and unsteady trend during the study period. It is found that the approvals had been slow in
    materializing themselves into actual inflows

    Indicators: FDI. Business India Intelligence; 2/10/2010, Vol. 17 Issue 3

    INDIA GETS HIGH ON FDI:- Joshi, Rishi


    The article reports on the increase of foreign direct investment (FDI) in India. Despite the projected slow down of the
    Indian economy, foreign investors are still high in the country. The country received FDI worth $20.13 billion during
    April-February 2007-08, having an increase of 70 percent which is the highest FDI flow in the country during any
    year. Among the sectors that attract FDI are services, computer software & hardware, telecommunications,
    construction and automobile.

    ECONOMIC GROWTH IN INDIA:: "DOES FOREIGN DIRECT


    INVESTMENT INFLOW MATTER?":- Sahoo, Dukhabandhu 1

    Mathiyazhagan, Maathai K. 2

    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.

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