Impact of Foreign Direct Investment on Sectoral Growth of Indian Economy

Abstract

At the backdrop of expanding economies and in the race of attracting higher investments and enhancing exports, it becomes important to analyse the relationship between Foreign Direct Investment and Growth in terms of output of the economy. A number of studies have been conducted for analysing the relationship and impact of FDI on Growth of the aggregate economy. This paper aims at assessing the impact and relationship of FDI and Growth with each other at the sectoral level. The impact is examined through Panel co-integration test followed by Random effects model. Granger causality test is also applied to assess the causation of each of these. The results indicate that Growth has an impact on FDI but FDI doesn’t have an impact on Growth at the sectoral level.

Keywords

• foreign direct investment
• growth
• sectors