Download This PaperForeign Direct Investment and Economic Growth in India: An Econometric Approach
Gupta, Karnika and Garg, Ishu (2015), "Foreign Direct Investment and Economic Growth in India: An Econometric Approach", Journal of Management Sciences and Technology, Vol. 2, No. 3, pp. 6-14, June (2015).
9 Pages Posted: 19 May 2020
Date Written: June 30, 2015
Abstract
Foreign direct investment (FDI) has been established as a most helpful international capital to the host country compared to portfolio investment that has short term characteristics. Many world economies including India have obtained financial benefits from FDI inflows for their economic growth. However, the fact that FDI does not bring immediate returns to any economy cannot be denied. Similar to other investments, it needs certain time for its effusive contribution. Therefore, average time required for FDI to make its contribution to economic growth is an important aspect which needs to be studied. Keeping this backdrop, the present study is undertaken to examine the time lag required for FDI to make its utmost impact on economic growth in India. For this purpose, data on FDI and GDP (taken as an indicator of economic growth in the study) for the period 2000 01 to 2012-13 are analyzed with the help of lag regression models. The findings confirm that FDI requires a time period of three years to make its contribution to the economic growth in a significant and utmost favorable manner. Thus, there is need for the regular rise in FDI to bring continuous increase in economic growth. To attract sufficient FDI, Government of India needs to improve the investment climate for foreign capital through the maintenance of political as well as economic stability along with curbing corruption.
Keywords: FDI, Economic Growth, GDP, Lag Regression Model, Indian Economy
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