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

1. Shenyang Aerospace University
Does Foreign Direct Investment Influence Economic
Growth In Rapidly Growing Economies?
An Examination of China and India
Master’s Program
Presentation
By
Roni Bhowmik

2. Presentation Outlines
 Introduction
 Purpose of Study
 Objective of Study
 Research Methodology
 Findings and Conclusions

3. Introduction
 The 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.

4. 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.

5. 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.

6. 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 CHINA
4. To study the significance of FDI with
other economic growth indicators.

7. Research Methodology
1. 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.

8. 2. Graphical Analysis
Graph show about FDI and growth rate in China

9. Graph show about FDI and GDP growth rate in India

10. Findings and Conclusions
FDI 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.