ECONOMIC GROWTH IN INDIA: "DOES FOREIGN DIRECT INVESTMENT INFLOW MATTER?"

Dukhabandhu Sahoo and Maathai K. Mathiyazhagan
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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

The Singapore Economic Review (SER), 2003, vol. 48, issue 02, 151-171

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.

Keywords: Foreign direct investment; Economic growth; Export; Co-integration (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (16)

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DOI: 10.1142/S0217590803000748

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