EXAMINING THE ECONOMIC GROWTH AND FOREIGN DIRECT INVESTMENT NEXUS IN INDIA: A CO-INTEGRATION BASED APPROACH.

Foreign direct investment is an important part of a country's strategy towards growth and development. This is especially true of developing countries, which take several steps to attract foreign direct investment to gain easy access to capital, and advanced technology. Hence, the relationship between economic growth and foreign direct investment must be examined to see if foreign direct investment is having a positive impact on economic growth of a country. This paper examines the nexus between economic growth and foreign direct investment in India for the period 1990-2014. Co-integration analysis and error correction mechanism are used to estimate the causal relationship between economic growth and foreign direct investment. Our empirical findings suggest that causality runs from economic growth to foreign direct investment. The robustness of the above findings is confirmed by the use of granger causality tests and residual diagnostics for the VECM model. For the period under study, we could not find a statistically significant causal relationship running from foreign direct investment to economic growth. [ABSTRACT FROM AUTHOR]