Impact of Foreign Direct Investment on growth

Abstract

This study examines effect of FDI on economic growth in the developing economies. The study uses regression tools to examine why few emerging markets have significantly benefited from Foreign Direct Investment and hence grown at a higher rate while few have been laggards. The study also analyses spillover effects of FDI in pharmaceutical sector of India wherein the effect of FDI on domestic firms has been studied and compared using the productivity measure ROCE. On the basis of regression results and macroeconomic data predications policy recommendations have been made. In this paper, a collective analysis has been done on the effect of FDI on growth of the following countries: India, Vietnam, Brazil, Thailand, Mexico, China and Indonesia. With GDP chosen as the growth parameter, the impact of FDI on growth has been evaluated using regression tools for these countries. Consequently, the reasons for variations in the results of various countries have then been studied and compiled. Then, a study of FDI and spillover effects in the pharmaceutical industry in India has been done. The productivity efficiency of domestic and foreign firms over the years has been plotted and compared to demonstrate the spillover effect. The results obtained are attached in the report.