Abstract:

Foreign Direct Investment (FDI) has emerged as one of the most significant sources of capital formation and economic development in emerging economies such as India. The relationship between FDI and macroeconomic variables is dynamic and often characterized by feedback effects. This study investigates the causal relationship between Foreign Direct Investment (FDI) and selected macroeconomic variables, namely Gross Domestic Product (GDP), Gross Domestic Savings (GDS), Gross Fixed Capital Formation (GFCF), Exports (EXP), Imports (IMP), Gross National Income (GNI), Net National Income (NNI), and Per Capita Income (PCI), using annual time-series data for India. The study employs the Granger causality framework after testing the stationarity and long-run equilibrium relationship among the variables. The empirical findings reveal both bidirectional and unidirectional causal relationships, suggesting that macroeconomic fundamentals significantly influence FDI inflows while FDI also contributes to economic growth.

Keywords:

Foreign Direct Investment, Granger Causality, India, GDP, Exports, GDS.

Aim/Objectives

Methods