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FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: TWO EQUALLY DESIRABLE DILEMMAS OF POLICY MAKERS IN INDIA

Journal: International Journal of Management (IJM) (Vol.11, No. 9)

Publication Date:

Authors : ;

Page : 903-915

Keywords : FDI; Economic growth; ARDL; Granger Causality; India.;

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Abstract

The study aims to analyze the importance of economic growth that has more relevance than Foreign Direct Investment (FDI) inflow for a stable development in India. The article takes the period of 1978 to 2019 to analyze the same. It applies Auto Regressive Distributed Lag Modelling Approach to find out the impact of economic growth. It is proved that there is a cointegration between FDI and economic growth in long run. In short run, both economic growth and FDI granger cause each other. Also, there exists a negative effect of FDI on economic growth in short run. Hence, the study recommends a threefold development process in India. The policy makers are suggested aligning the economic policies in a way to focus at the first stage only on economic growth which will bring FDI in India. At the second stage, they need to find relevant macroeconomic variables that will be positively influenced by FDI so that, at the third stage, these variables will ultimately contribute to growth of Indian economy.

Last modified: 2021-01-30 17:19:12