Does Foreign Direct Investment Influence Economic Growth In Rapidly Growing Economies?

An Examination of China and India

Shenyang Aerospace University

Master’s Program Presentation

ByRoni Bhowmik

Presentation Outlines

Introduction Purpose of Study Objective of Study Research Methodology Findings and Conclusions

IntroductionThe recent studies conducted on FDI

shows that the relevance of FDI inflows for the economic growth is very important and the policy makers adopted more liberalized approach to gain the benefit out of it. It is argued that FDI inflow has got so many effects on a growing economy. The role of FDI in creating employment, transferring technology, creating spillover effects and other activities that can act as a fuel for economic growth is quite worth noticing.

Cont. Studies done by Alfero (2003), Blomstrom et.al

(1994) and Borenstein (1998) suggests that a country in order to attract FDI inflows should possess some relevant factors like better labor market, balance of payment, technology and infrastructure, stable policies etc. These factors act as a determinant to the flow of FDI in the host country. The dissertation explicitly covers the theory relating to the importance of FDI, the factors determining its growth and FDI impact on host country development.

The countries of concern in the dissertation are India and China. China opened its economy during 1979 by adopting open door policy.

Purpose of Study The purpose of the study is to create a

model of both the countries and to analyze the pros and cons that exist in both economies and to find ways to overcome the problem of laggards through an effective empirical analysis. The study also intends to reveal a path for the less developed and other developing economy’s, which might emerge in the next few decades.

There are only few research works that are from the Indian point of view. This study is also aimed to fill those gaps.

Objectives of Study

1. To evaluate the contribution of FDI in economic growth (in INDIA and CHINA)2. To find the nature of contribution made by these investment.3. To evaluate the rate of inflow of these investment in INDIA and CHINA4. To study the significance of FDI with other economic growth indicators.

Research Methodology1. Methodology and Data collection:The data undertaken for the study covers a period of 39 years starting from 1970 to 2009. The section for the purpose is divided into two. The first section deals with graphical representation. This method is adopted to explain the relationship between the growth rates of the primary variable of concern, FDI and GDP for India and China as a whole. The second section presents the regression analysis for the aggregate for India and China as a whole.

2. Graphical AnalysisGraph show about FDI and growth rate in China

Graph show about FDI and GDP growth rate in India

Findings and ConclusionsFDI inflows in India and China was periodical, and the relevance of the same is increasing year by year. China being isolated for more than 30 years opened its economy on the late 1970’s, since then the flow was astonishing. China at present is the main FDI attracting zone in entire Asia and India is in second place according to the recent studies. India on the other hand opened its economy in 1991 with the introduction of Liberalization, Privatization and globalization policies, since then the inflow was quite good. The pre- liberalization period of both the countries were of a closed nature, giving due importance to domestic firms. After realizing opportunities and possible benefits the policy makers in both the countries decided to open the economy. The main aim of this research is to examine the role of FDI in economic growth in CHINA and INDIA.

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