10.1.1.31.9401 - ECONOMIC GROWTH CENTER YALE UNIVERSITY...

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Unformatted text preview: ECONOMIC GROWTH CENTER YALE UNIVERSITY P.O. Box 208269 New Haven, Connecticut 06520-8269 http://www.econ.yale.edu/~egcenter/ CENTER DISCUSSION PAPER NO. 816 EXPORT GROWTH IN INDIA: HAS FDI PLAYED A ROLE? Kishor Sharma Charles Sturt University Australia July 2000 Note: Center Discussion Papers are preliminary materials circulated to stimulate discussions and critical comments. Export Growth in India: Has FDI Played a Role? Kishor Sharma Charles Sturt University (Australia) Abstract Export growth in India has been much faster than GDP growth over the past few decades. Several factors appear to have contributed to this phenomenon including foreign direct investment (FDI). However, despite increasing inflows of FDI especially in recent years there has not been any attempt to assess its contribution to India's export performance- one of the channels through which FDI influences growth. Using annual data for 1970-98 we investigate the determinants of export performance in India in a simultaneous equation framework. Results suggest that demand for Indian exports increases when its export prices fall in relation to world prices. Furthermore, the real appreciation of the rupee adversely effects India's exports. Export supply is positively related to the domestic relative price of exports and higher domestic demand reduces export supply. Foreign investment appears to have statistically no significant impact on export performance although the coefficient of FDI has a positive sign. Key Words: Exports, commercial policy, export subsidies, foreign direct investment, exchange rates and India. JEL Classification Codes: F1, F13, F14 and F21. _______________ * I am grateful to Professor T. N. Srinivasan for his advice while I was working on this paper during my visiting appointment at Yale University in Spring 2000. I am also grateful to Edward Oczkowski for his advise on econometric work and Prema-Chandra Athukorala for encouraging me to write this paper. All remaining errors are mine. 2 I Introduction India's exports have grown much faster than GDP over the past few decades. For example, its exports have grown over 11% per annum while growth in GDP is about 5% during 1970-98 periods. Exports have grown even faster since 1945-95. Several factors appear to have contributed to this phenomenon including foreign direct investment (FDI) which has been rising consistently especially from the early 1990s. By 1997 India became the ninth largest recipient of such investment among the developing economies (World Bank, 1998:20). 1 However, despite increasing inflows of FDI there has not been any attempt to assess its contribution to India's export performance- one of the channels through which FDI affects growth....
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This note was uploaded on 01/15/2012 for the course ECON 101 taught by Professor Mikson during the Spring '08 term at Aarhus Universitet.

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10.1.1.31.9401 - ECONOMIC GROWTH CENTER YALE UNIVERSITY...

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