Abstract
Booming foreign direct investment (FDI) in post-reform India is widely believed to promote economic growth. We assess this proposition by subjecting industry-specific FDI and output data to Granger causality tests within a panel cointegration framework. It turns out that the growth effects of FDI vary widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing sector, whereas any causal relationship is absent in the primary sector. Most strikingly, we find only transitory effects of FDI on output in the services sector. However, FDI in the services sector appears to have promoted growth in the manufacturing sector through cross-sector spillovers.
| Original language | English |
|---|---|
| Pages (from-to) | 1192-1212 |
| Number of pages | 21 |
| Journal | World Development |
| Volume | 36 |
| Issue number | 7 |
| DOIs | |
| State | Published - Jul 2008 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth -
SDG 10 Reduced Inequalities
Keywords
- India
- causality
- cointegration
- economic reform
- foreign direct investment
- growth effects
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