Inward Foreign Direct Investment Flows and GDP in India since 1991: A Connectivity Analysis

Foreign Direct Investment, being a paramount topic of importance and relevance to economies, both developed and developing, needs no introduction to the readers. The multitude of studies relating to FDI itself speaks of its preponderance in the present world experiencing wide augmentation of economic activity, in terms of International trade as well as capital flows across national boundaries. Foreign Direct Investment, in simple terminology is a foreign investors or firms interest of pooling their resources in a country other than theirs with an incitement of having a say in the management of the enterprise. The liberalisation process marked the beginning of the boom of FDI Inflows in India stimulated with the relaxation in the controls set by the regulating forces. Since then, the upsurge in FDI Inflows in distinct sectors as well as a one whole driving force for the economic development of the country has evolved into a matter of never ending discussions and debates. The paper discusses the manner in which FDI Inflows fortify or corrode the Gross Domestic Product of Indian economy and determines the relationship between the two variables. The study furnishes annual time series data pertaining for the period ranging 1991-2013 from UNCTAD Statistics. The study incorporates Ordinary Least Squares Regression analysis to ascertain the connection between FDI Inflows and Gross Domestic Product. The results of the econometric technique conclude that there exists a negative and significant relationship between FDII and GDP for the time frame 1991-2013. More precisely, the results demonstrate that Foreign Direct Investment Inflows inflicts the Gross Domestic Product of the Indian economy disparagingly.