Impact of FDI in India: State-Wise Analysis in an Econometric Framework

Abstract

While there are many empirical studies on the impact of FDI in developing countries few of them have been carried out in India at the state level which gives a holistic as well as detailed view of the spillover of FDI This paper analyzes the impact of FDI on eight major states in India during the post- reform period from 1991-2004 using three models FE RE and SUR models FE Fixed Effects and RE Random Effects give a holistic view whereas the SUR Seemingly Unrelated regression model gives a more detailed picture of the eight states of India Results show that overall FDI has a positive impact on labour productivity and employment for the period considered However across states FDI is more productive only when the states have more absorptive power also labour productivity is growing only at the expense of employment