Impact of Foreign Direct Investment on Economic Growth of China and India: An Empirical Analysis

Tom Jacob and Nikhita Anna Jiji
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Tom Jacob: Department of Commerce, Christ College, Irinjalakuda, Kerala, India.
Nikhita Anna Jiji: Department of Commerce, Christ College, Irinjalakuda, Kerala, India.

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Abstract: Foreign Direct Investment is an investment made by firms or individual of one country in the business of another country. Foreign investments have a positive impact on the development of the emerging economy. Inflows of Foreign Direct Investment (FDI) strengthen the trade network of a country at global level and also provide financial assistance to that country and often seen as important catalysts for economic growth in the host countries. FDI affects the economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfer in the host countries. This paper is to analyse the impact of FDI on the economic growth of India and China. By applying Regression Analysis exhibit that FDI has significant impact on the growth of Chinese economy but at the same time FDI have only minor or insignificant role for the development of the Indian economy during the study period from 1991 to 2020. Average FDI as a percentage of Gross Domestic Product in India is very low compared to China. This is the reason for insignificant contribution of FDI on the economic growth of Indian economy.

Date: 2021-01-28
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Published in Asian Journal of Economics, Finance and Management , 2021, 3 (1), pp.16-26

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05187987

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