Revisiting FDI Led Economic Growth Hypothesis in India an Autoregressive Distributed Lag Approach

Abstract

The aim of this study is to revisit the relationship between foreign direct investment (FDI) and economic growth. The motivation behind this study is that there is ambiguous evidence across countries on FDI and economic growth. However, there have been many studies conducted across countries but there is a scanty literature available on FDI and economic growth in India. The relation between FDI and economic growth is vague. Therefore, this study is an addition to all previous studies, try to posit the relationship between economic growth and FDI. Energy consumption has been taken as a control variable into consideration. The study has covered time-series data from 1990 to 2019. The ARDL bound test approach has been employed to confirm the cointegration among the variables. The bound test confirmed the existence of a long-run relationship between FDI and economic growth. The error-correction term negative sign indicates that there is a divergence between dependant and independent variables in the short-run. The empirical results state that FDI has a significant impact on economic growth