Which Indian Industry Benefits from FDI? A Panel Co-Integration Approach
S. Mahalakshmi, S. Thiyagarajan, G. Naresh
Economic liberalization or market reforms have become the buzz word in economics all over the world in the recent years. Among various aspects of economic liberalization, foreign capital, particularly inflow of foreign direct investment (FDI) has been viewed as a main engine for economic development in the world economy. Thus this paper attempts to analyze the impact of FDI inflows on the performance of various Indian industries. Using Panel Co-integration tests namely Pedroni Residual Co-integration, Kao Residual Co-integration test and Johanson Fisher panel co-intergration tests, the presence of co-integration between FDI inflows and the performance variables of selected industries have been tested. The results of the paper reveals that there is a long run relationship between industry performance indicators and FDI only in case of services, telecom, computer software and hardware, real estate and automobile industries and in case of majority of other industries, there is no long run relationship between industry performance indicators and FDI inflow.