Foreign Direct Investment And Performance Of Indian States
Keywords:
Foreign Direct Investment, Growth, Human Capital, Financial AssistanceAbstract
In this article we examine the effects of FDI in Indian States in the post reform (post 1991) era. The variation across these states and territories is immense in regard to demography, geography, culture, and economic conditions. During early 1990s India suffered from massive balance of payment and foreign exchange crisis, which led Indian Government to opt for liberalized economic policies in 1991. Since the adoption of New Industrial Policy (NIP) and on-going reform process, Foreign Direct Investment (FDI) inflows have increased substantially. This paper undertakes an empirical investigation to determine the impact of FDI on growth of Indian states. Using most recent data on FDI our results indicate higher human capital and financial assistance are essential ingredients to reap benefits from FDI for Indian states. Results are robust to inclusion of other relevant variables.
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