The Synergy among Exports, Foreign Direct Investment and Economic Growth in India: Auto Regressive Distributed Lag Bounds Testing Approach

Abstract

The present study proposes to identify a relationship between exports, foreign direct investment (FDI), and economic growth in India. The study is based on secondary data related to India's FDI, exports, and economic growth in logarithmic form. The data from 1970 to 2019 has been analyzed using the auto regressive distributed lag (ARDL) model for long and short-run causality and cointegration. The analysis of data reveals that in 50 years of study, the inflow of FDI has been stable in the country with minimum dispersion. ARDL testing approach shows the absence of heteroskedasticity, multicollinearity, and auto-correlation in the data set. The test results for the long run further disclose that exports granger cause FDI which results in the country's economic growth. There is a gap in empirical literature to examine the relationship between India's FDI, exports, and economic growth. The ARDL model has been used to identify the interconnections mainly for two variables and scantily for three variables. The present research has been novel in identifying the interconnectedness between India's FDI, exports, and economic growth in the short and long run using the ARDL model. The results of the study have important suggestions for policymakers to boost export-led growth and enhance the flow of investment into the country. All the work has been done in original by the authors, and the work used has been acknowledged appropriately.