Comparative analysis of impact of foreign direct investment, exports and employment on growth of manufacturing industries in India

Abstract

In today’s ever-changing environment of international trade and investments, each economy has been aiming towards attracting higher investments and enhancing exports. This makes it evident to investigate and analyze the relationship between Foreign Direct Investment and Growth in terms of output of each industry of the economy. A number of studies have been conducted for analyzing the relationship and impact of FDI on Growth of the aggregate economy with only a few for industry wise analysis. This paper aims at assessing the impact and relationship of FDI and Growth with each other at the industry level. The impact is examined through Panel cointegration 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 and FDI impact each other significantly at the industry level.