Journal Article
Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis
Authors
Publication Date
DOI
10.1016/j.worlddev.2007.06.014
JEL Classification
F21
F23
O53
Key Words
Related Topics
Foreign Direct Investments
Booming 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.
