FOREIGN INVESTMENT AND ECONOMIC GROWTH IN INDIA

Abstract

It is widely considered that foreign capital plays a significant role in contributing to economic growth.It stimulates and enhances growth in emerging economies. In developing countries, capital formation directly results in increase in investment and thereby economic growth.When there is capital deficiency in developing economies, foreign capital helps to solve the problem of capital deficiency which in turn boosts economic growth.This paper attempts to find out whether foreign investment is a causative factor that determines economic growth in India. Granger causality test has been used to ascertain the casual relationship between Foreign Direct Investment, net inflows (% of GDP) and GDP growth rate for the years 1993 - 2019.It was found that foreign investment inflows do not cause GDP growth in the study period.