Kiel Working Papers, Kiel Institute for World Economics
No 1375:
Foreign Direct Investment in Post-Reform India: Likely to Work Wonders for Regional Development?
Peter Nunnenkamp and Rudi Stracke
Abstract: We make use of a new and detailed database on FDI
approvals since the early 1990s to address two major issues related to FDI
and regional development in India in the post-reform period. First, we
analyze the location choices of foreign investors. The evidence indicates
that the concentration of FDI in a few relatively advanced regions may have
prevented FDI effects from spreading across the Indian economy. Second, we
evaluate whether the link between FDI and economic growth has become
stronger in the aftermath of reforms. Various categories of FDI are indeed
positively correlated with per-capita income growth across Indian states.
However, it is only for the richer states that FDI appears to be associated
with higher growth. FDI is thus likely to increase regional income
disparity in India.
Keywords: FDI approvals, sub-categories of FDI, location choice, economic growth, regional divergence; (follow links to similar papers)
JEL-Codes: F23,; O18,; O53; (follow links to similar papers)
29 pages, August 2007
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