Navigating the labour landscape: does FDI influence employment in India?

Anjali Sreekumar and M. Padmaja

International Journal of Development Issues, 2025, vol. 25, issue 1-2, 40-58

Abstract: PurposeThe purpose of this study is to examine the impact of inward foreign direct investment (IFDI) on employment generation in India, addressing a gap in existing research despite recent improvements in labour market indicators highlighted by the Indian Employment Report (2024).Design/methodology/approachThis research uses annual time-series data from 1991 to 2016 and applies the Autoregressive Distributed Lag (ARDL) model to analyse both the short- and long-run dynamics between IFDI and employment in India.FindingsThe results of this study indicate that IFDI has a statistically significant and positive impact on employment, suggesting that foreign investment not only contributes to economic growth but also leads to job creation by crowding in employment opportunities.Research limitations/implicationsOne key limitation of this study is the unavailability of consistent and reliable data beyond 2016. Additionally, this study focuses on national-level aggregates and does not account for sectoral or regional variations in FDI impact. Future research could benefit from disaggregated data for a better understanding.Social implicationsBy identifying a positive link between IFDI and employment, this study underscores FDI’s potential to contribute to social stability through job creation. This is especially relevant in a country like India, where employment generation remains a key development challenge.Originality/valueThis study adds to the limited empirical literature on the employment effects of IFDI in India by focusing on long-term macroeconomic data and using the ARDL framework. This study provides new insights into how the quality and nature of FDI influence labour market outcomes, a dimension often overlooked in previous research.

Keywords: India; FDI; ARDL; Economic growth; Employment generation; Inward foreign direct investment (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijdipp:ijdi-06-2025-0150

DOI: 10.1108/IJDI-06-2025-0150

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