Journal Article

Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis

Authors

  • Chandana Chakraborty
  • Peter Nunnenkamp
Publication Date

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.

Info

JEL Classification
F21, F23, O53
DOI
10.1016/j.worlddev.2007.06.014

Key Words

  • ausländische Direktinvestitionen
  • causality
  • cointegration
  • economic reform
  • foreign direct investment
  • growth effects
  • India