An Empirical Analysis of the Relationship between FDI Inflow and Outflow with the Economic Growth of India

Satyajit Mallick and Rashmi Tanwar
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Satyajit Mallick: Satyajit Mallick (corresponding author) is a Doctoral Student in the Department of Economics, School of Business and Management Studies, Central University of Haryana, Mohindergarh, Haryana, India. E-mail: satyajitmallick777@gmail.com
Rashmi Tanwar: Rashmi Tanwar is an Assistant Professor in the Department of Economics at the School of Business and Management Studies, Central University of Haryana, Mohindergarh, Haryana, India. E-mail: rashmitanwar@cuh.ac.in

Margin: The Journal of Applied Economic Research, 2025, vol. 19, issue 1, 90-110

Abstract: This study extensively analyses the relationship between the inflow and outflow of foreign direct investment (FDI) and their impact on India’s economic growth. Utilising secondary data spanning the period 2000 to 2024, the research employs the vector error correction model to rigorously investigate the short-term and long-term dynamics among the relevant economic variables. The findings of the analysis reveal a complex and multifaceted interplay between FDI flows, trade openness, exchange rates, market size, infrastructure development and the overarching economic growth of India. Specifically, the results indicate that FDI inflow exerts a positive influence on India’s gross domestic product (GDP), suggesting its role in stimulating economic expansion. Conversely, the study also finds that FDI outflow has a negative effect on GDP, implying potential implications for domestic capital and investment. JEL Codes: C32, F21, F43, F62, O53

Keywords: Foreign Direct Investment; Economic Growth; Vector Error Correction Model; Globalisation; India (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:19:y:2025:i:1:p:90-110

DOI: 10.1177/00252921251362673

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