FDI REFORMS AND INDUSTRIAL WAGE AFTER THE LAUNCH OF “MAKE IN INDIAâ€: EMPIRICAL EVIDENCE

Aaheli Ahmed and Debashis Chakraborty ()
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Aaheli Ahmed: Department of Economics, Indian Institute of Foreign Trade, Kolkata, India
Debashis Chakraborty: Department of Economics, Indian Institute of Foreign Trade, Kolkata, India

Global Economy Journal (GEJ), 2024, vol. 24, issue 01n04, 1-30

Abstract: India gradually started liberalizing its industrial, trade and foreign direct investment (FDI) related policies since the launch of economic reforms in 1991. The empirical evidence on the impact of FDI spillovers on industrial wages in India has generated mixed results so far. The current study analysed the impact of FDI inflows on the real wage rates of the workers using data from seven major industrial sectors between 2001–2002 to 2019–2020. The two-stage least squares (2SLS) estimation results suggest that FDI inflows positively influenced both the skilled and unskilled wage rates. Moreover, FDI inflows in productive sectors led to a greater rise in wages vis-à -vis the unproductive sectors. In addition, key government policy initiatives like the Make-in-India (MII) scheme and FDI reforms were found to be effectively enhancing wage rates, though the impact on skilled wage rates was greater. The paper stressed the need to create a holistic environment that can attract FDI in both upstream and downstream segments, facilitating India’s deeper participation in global value chains (GVCs) and IPNs on the one hand and realisation of associated dynamic benefits on the other.

Keywords: Indian industry; trade; skilled and unskilled workers; wage; foreign direct investment; marginal intra-industry trade; 2SLS (search for similar items in EconPapers)
JEL-codes: F14 F16 F21 J24 J31 L60 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2194565924500015

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