Impact of Foreign Direct Investment on Economic Growth in India: A Co integration Analysis
|
| Title | Impact of Foreign Direct Investment on Economic Growth in India: A Co integration Analysis |
| Authors | |
| Abstract | Abstract: The role of FDI in the growth process has been a burning topic of debate in several countries including India. This paper is an attempt to analyze the causal relationship between Foreign Direct Investment (FDI) and economic growth in India and tries to analyze and empirically estimate the effect of FDI on economic growth in India, using the cointegration approach for the period, 1990-91 to2010-11. The empirical analysis on basis of ordinary Least Square Method suggests that there is positive relationship between foreign direct investment(FDI)investment and GDP and vice versa. The unit root test clarified that both economic growth and foreign direct investment were found to be integrated of order one using the Kwiatkowski, Phillips, Schmidt and Shinn (KPSS) test for unit root only. The cointegration test confirmed an existence of long run equilibrium relationship between the two as confirmed by the Johansen cointegration test results. The Granger causality test finally confirmed the presence of uni-directional causality which runs from economic growth to foreign direct investment. The error correction estimates gave evidence that the Error-Correction Term is statistically significant and has a negative sign, which confirms that there isn’t any problem in the long-run equilibrium relation between the independent and dependent variables. For FDI to be a noteworthy provider to economic growth, India would do better by focusing on improving infrastructure, human resources, developing local entrepreneurship, creating a stable macroeconomic framework and conditions favourable for productive investments to augment the process of development. |
| Publisher | World Science Publisher |
| Date | 2012-08-07 |
| Source | 2167-6372 |
| Rights | Copyright NoticeProposed Creative Commons Copyright Notices1. Proposed Policy for Journals That Offer Open AccessAuthors who publish with this journal agree to the following terms:Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work´s authorship and initial publication in this journal.Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal´s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).Proposed Policy for Journals That Offer Delayed Open AccessAuthors who publish with this journal agree to the following terms:Authors retain copyright and grant the journal right of first publication, with the work [SPECIFY PERIOD OF TIME] after publication simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work´s authorship and initial publication in this journal.Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal´s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access). |