Summary and Conclusions

Mahendra Pal ()
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Mahendra Pal: University of Delhi

Chapter Chapter 7 in Foreign Capital and Economic Growth in India, 2023, pp 173-180 from Springer

Abstract: Abstract India shifted her policy from debt creating to non-debt creating foreign capital under economic reforms of 1991. This book is designed to fulfill a long-felt need for a wide-ranging empirical research on foreign capital-growth nexus. Major objective of the study is to examine the long-run relationship between different types of foreign capital and growth in India for the period 1971-2013 with the help of cointegration, VECM, IRF, VDC and Granger causality. The study detects financial deepening, trade openness, market size as potential determinants of FDI. Long-run and positive relationship is established between FDI and Growth, with a causality running from FDI to Growth, Next positive Aid-growth nexus is established in the long run with causality running from Aid to Growth. Further net foreign capital-growth nexus in the long run is also established, however, with no causality direction. Further, we also examine the relative significance of Aid and FDI Results reveal the fact that Aid is more productive than FDI, but when export variable is included in the model, FDI shows better results than Aid. Results are also reconfirmed with the application of IRF and VDC. Superiority of FDI over Aid is not established in India; hence two variables remain complementary rather than substitute to each other in India. Governments of India should not undermine the role foreign aid in the race of FDI inflow.

Keywords: FDI; Aid; Growth; Export; Cointegration; Complementarity (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-99-2299-4_7

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DOI: 10.1007/978-981-99-2299-4_7

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