Has FDI Played A Role In Indian Industrial Growth?
Investment, or creation of capital, is an important determinant of economic growth. In general, investment may lead to creation of physical capital (e.g. Creation of physical goods, such as machines and equipment), financial capital (e.g. creation of equity capital) and human capital (e.g. creation of health, education and research and development activities). In combination with other factors of production (e.g. labour and land) and technology, investment determines the levels and growth through changes in production and consumption of goods and services. This article strives to study the impact of FDI on IIP( Index of Industrial Production) in pre and post liberalized era. SRL MODEL is used along with OLS TECHNIQUE. To assess the linkage between IIP and FDI we consider FDI inflows and IIP in the panel for a period of 1981-2010. The Index of Industrial Production has been converted on single base year at zero decimal point. The overlapping year considered is 1997-98 and 2004-05 as base year.
Keywords: FDI, IIP,OLS, SRL, Total Factor Productivity, Full convertibility of rupee, Production Function