Foreign Direct Investment and Exports in India: A Cointegration Analysis

There has been a long debate in the literature on how host country’s exports respond to inward FDI. A crucial issue in this debate is whether FDI is a means of stimulating export performance of the host countries. The theories and the literature related to FDI-exports linkages suggest that FDI impacts host countries’ growth and development in general through its direct, indirect and spill-over effects and exports in particular. Moreover, the literature on the topic provides both significant and insignificant effects of FDI on host countries’ exports across countries. The dynamics of the influence of FDI on exports is far more complex in case of India. Against this complexity,the aim of the study is to specifically re-examine the impact of FDI inflows on exports in India with an extended period from 1970-2015.