INTERNATIONAL SEMINAR ON INDIAN ECONOMIC DEVELOPMENT IN RECENT YEARS:A MACROECONOMIC PERSPECTIVE ON 25JULY,2017

ORGANISED BY

DEPARTMENT OF ECONOMICS,BARRACKPORE RATRAGURU SURENDRANATH COLLEGE

IN COLABORATION WITH

DEPARTMENT OF ECONOMICS ,WESTBENGAL STATE UNIVERSITY

CENTRE FOR TRAINING AND RESEaRCH IN PUBLIC FINANCE AND POLICY ,

CENTRE FOR STUDIES IN SOCIAL SCIENCE,CALCUTTA

After inauguration welcome address was given by Principal Dr.Manojit Roy showed appreciation on the theme chosen by the college.Dr.Tusher Kanti Nandy,(CTRPFP) tried give a brief idea of the centre where research,training on public finance under ministry of finance have been conducted.Prof Kausik Gupta of Calcutta University gives inaugural lecture on “Macroeconomic perspectives of Indian Economic development In recent years:An overview” where he emphasized on inclusive growth,changes in growth in several phases,eg,fall due to corruption, and rise due to social sector development,He noted Sen and Dreze and Bhagavati and Panagaiya in respect of growth and development.He gave reasons for  jobless growth in the phases 2008-2013.He tried to show real balance effect due to demonetization,and the reduction of growth.Govt.failed to control black money and less availability internet for digital economy.He also raised some questions about GST in context specification and rates and asked whether it is related with demonetization.Prof.Basab Chowdhury ,Vice Chancellor of WBSU, welcome all and said some tides to read economics however he is not glad why students are unwilling to read economics whereas it is related to real life and can solve common problems for all.Prof.Sushil Halder,of Jadavpur University addressed on “Gender and Economic Development in India:Some emerging issues” where he noted that is growth gender nutral,and discussed about gender gap ratio,HDI,GDI,GEM,and reviewing literature he showed that over all sex ratio trend is declining and then rising  and it is heterogeneous for states in India.He showed it by comparative studies.He used LSDV model with dummy variable to verify this notion.He also showed female work participation rate,poverty and child ratio and found significant results.

In the special lecture session,Dr.Debabrata Mukhopadhyaya of WBSU,gave lecture on effects of demonetization on Indian capital market showing structural breaks and nonstationarity in share indices in India.Even he showed changing pattern of autocorrelation structure and verified bank indices nonstationary after demonetization.Prof.Tusher Kanti Nandy of CTRPFP,lucidly explain the concepts,classification and system of GST in India.He explained the rates,calculation of rates,exemption limit,distribution of turnover,finance commission views,on GST rates and implications.Dr.Jayanta Dwibedi of BKC college in his paper “Fiscal Performances in Indian States” explains the role of centre and state on the fiscal deficit where he emphasis on revenue deficit.He explained the distribution of tax revenue among the states where role of finance commission is vital.He worked out a model using transfer functions where he intended to show that poor states should get higher tax revenue than the richer .Prof.Anindya Biswas of  Spring Hill University,USA said his lucid lecture on “Real sector and financial sector of the economy:An Overview”where he explains marginal value of wealth,inflation gap,output gap,potential gap,and tried to verify it in US economy and he endeavours to find Taylors Macro rule in near future.

There were two parallel technical sessions each contain 8 papers.

In technical session-1

1]Anadi Sarker-THKJain College-“A Study on development of rural areas through khadi sector in India”

2]Ashoke Biswas-APC College-“India’s manufacturing sector :Challenging in Make in India Campaign”

3]Rajyasri Roy-Phd scholar of Calcutta University-“Are Informal workers more poverty striken than the formal workers in India”

4] Dipak Biswas-Swami Niswambalananda Girl’s College-“Role of NABARD on SHG Bank linkage programme for Indian Economic Development: study”

5]Dr.Debesh Bhowmik-Retired Principal-“Econometric analysis of India’s International GDP share during 1960-2015”

6]Anurag Banerjee-MPhil Scholar-University of Calcutta,-“Determinants of the level capitalization of Indian commercial banks”

7]Mainak Bhattacharjee-Heritage College-“Globalisation and economic development:A study on India vis-à-vis world”

8]Avik Chattopadhyaya-Jaipuria College-“Agricultural Insurance :A way towards economic growth as well as prevailing difficulties in West Bengal”

Session-2

1]Sangita Roy-Research Scholar-Viswa-Bharati-“Trade liberalization,skilled-unskilled labour and wage distribution”

2]Sushrita Mukherjee-Taki Govt.College-“Demonetisation in India:An attempt towards achieving a modern,digital and cashless economy”

3]Pallabi Jalasaria-JRF Research Scholar-Calcutta University-“Efficiency analysis of Indian commercial Banks in Post reform period”

4]Moumita Das-BRS College and Soumyadip Chattopadhyaya-Viswa Bharati-“An analysis of fiscal decentralization to Urban local governments in West Bengal”

5]Gobindalal Mandal(NewAlipore College)and Atanu Ghosh(NewAlipore College)-“Generation of tax revenue in India-A tool for economic development”

6]Archita Pramanik and Mauli Sanyal(New Alipore College)-“Education in Jeopardy:The effect of FRBM Since inception”

7]Dipankar Das and Dr.Debabrata Mukhopadhyay(WBSU)-“FDI inflows and Military expenditure:A study  across the emerging market economies”

8] Dr.Debabrata Mukhopadhayay and Arun Kumar Mandal(WBSU)-“Infrastructure development and changing market penetration of consumer durables in rural India”

An Econometric analysis of world GDP share of India during 1960-2015

Dr.Debesh Bhowmik(Retired Principal)

Abstract

In this paper, author attempted to analyse India’s international GDP share during 1960-2015 with econometric models taking the data from World Bank. Semilog linear trend model, exponential trend model were used to find trend of Growth. Variance ratio test was used to show random walk. AR(1) model was used to show stationary, convergence and oscillations. ARIMA (1,1,1) forecast model was tested for  stationary of the series. Bai-Perron(2003) model explained to show structural breaks and Hodrick-Prescott Filter(1997 ) model minimized the cycles  for smoothness of trend of GDP share.

The paper concludes that India’s international GDP share has been declining at the rate of 0.459% per year during 1960-2015 and has been decreasing exponentially at the rate of 0.259% per year significantly. The variance ratio test confirmed that the series follows random walk. AR(1) process is significant, stable, converging and stationary. Forecast for 2035 of AR(1) model  is also a good fit. ARIMA(1,1,1) forecast model showed stable although non-stationary and likely to move downward towards 2035.Its AC and PAC are not declining and impulse response functions are diverging. Bai-Perron (2003) test assured that the GDP share has three structural breaks in 1968,1988 and 2006 respectively. The first two are downward and the third one is upward. H.P.Filter (1997)model reduced the cycle into a smooth trend which showed a clear tough during the study period. The GDP share contains cyclical fluctuations where 4peaks and 6 toughs are clearly visible.

Key words-  International GDP share, exponential growth, structural break, non-stationary, H.P.Filter

JEL-N15,O21,O24,O57,O10

 

Current Issue

Vol. 5 (2) July - December 2016

1.	Structure, Strategy and Market Power of Genomma Lab JoséG.Vargas Hernández
2.	Adjustment Dynamics Between Alternative Asset Classes: Gold, Rupee & Crude Using ARDL Bounds Testing Approach Namrata Chaubey,Apurva Gupta,Rakesh Shahani
3.	Impact of Pester-Power on Parents Purchasing Pattern For Child-centric Products Garima Malik,Manjot Shah
4.	A Perceptional Study From The Consumer Point of View on Online Shopping Market: An Exploratory Study in North 24 Parganas District (W.B.) Indrajit Ghosal
5.	India's Foreign Direct Investment Inflows: Cointegration and Vector Error Correction Analysis Debesh Bhowmik
6.	Antescedents of Organised Retail Customer Satisfaction: An Empirical Analysis With Special Reference To Spencer's in Guntur District P. Daniel,M.S. Narayana,P. Vijay Kumar
7.	Impact of Working Capital Management in The Profitability – A Case Study of Oil and Natural Gas Corporation P. Hanumantha Rao
8..	EVA Based Performance Measurement: A Comparative Study of With Profitability and Leverage of Indian Corporates Priya Jain
9.	Factory Automation- To Be or Not To Be Garima Mathur,Ruturaj Baber Abstract In this paper author explained the trend lines, random walk, stationarity, structural breaks and volatility of FDI inflows in India during 1971-2015.Both log linear and exponential trends are significant. FDI inflows is stationary and showed four structural breaks in 1985,1994,2000 and 2006.Author found the relation among FDI inflows, growth rate, interest rate, inflation rate, exchange rate, fiscal deficit, external debt and trade openness with the help of Granger causality, Johansen cointegration test and vector error correction models. Trace statistic has four cointegrating equations and Max Eigen Statistic has three cointegrating equations. The speed of the vector error correction process is more or less slow except for change in interest rate and change in inflation rate which are significant where VECM is stable and diverging.Limitations and future scope of research are added. Policy recommendations are included. Key words- Foreign Direct Investment Inflows, ARIMA, structural breaks, causality, cointegration, vector error correction JEL- E23,E24,F13,F4,F2,O54

DYNAMIC EVOLUTION OF MANAGEMENT PARADIGM

DYNAMIC EVOLUTION OF MANAGEMENT PARADIGM 

This book titled “Dynamic Evolution of Management Paradigm” is an outcome of two-days International Seminar at Vidyasagar University (Department of MBA) during 26-27 February,2016  from where 38 papers have been selected for this edited volume.The editors are Prof and Head of MBA department Dr.Sudin Bag and Dr.Debesish Biswas,Assistant Professor.The study area was covered in Business, Economics,Management,Marketing  ,Accounting ,Finance and other allied areas on global basis.Many academicians in India and abroad including research scholars of Vidyasagar University attended the seminar and presented their papers.Prof.Ranjan Chakraborty,Vice Chancellor of Vidyasagar University inaugurated the seminar.

Some important papers of The contents are given below:

1]Consumer preference at the time of purchasing a smartphone :A study using conjoint analysis-Debarun Chakraborty and Suvojit Pahari

2]Peoples perception of green marketing and its influence on consumers of WestBengal-Akash Bhattacherjee and Surjyashikha Das

3]The supply chain management in the Indian coal industry with special reference to Ananda Carbo Pvt.Ltd.—Saroda Chatterjee

4]Resellers perceptual audit on different cement brands:A study on New Allied Products of a cement industry—Biswajit Roy and Sudin Bag

5]Redefination of Accounting cycle in its environment—Prof.Nibedita Mallick

6]FDI in Banking sector in India—Dr.Susanta Mitra and Nirmal Chandra Roy

7]Corporate corruption and corporate governance-a conceptual view---Dr.Pradeep Kumar Basu

8]NGO leadership  dynamics—Chandrajyoti Sen Majumder

9]Employee empowerment :A strategic approach to attain business excellence—Ananya Ghosh and Prof Debeshish Biswas

10]Are research and development activities dynamic in Indian Pharmaceutical industry:An empirical study

11]Role of crisis management to survive infrastructure sector-An Analysis---Sudarshan Maity

12]Corporate social responsibility:relevance of csr in Indian Business environment as a strategy for corporate sustainability---Prof.Gautam Sharma

13]Sustainable community development through ecotourism:A case study of North Bengal and Sikkim region---Dr.Shuvendu Dey and Analjyoti Basu

14]Micro credit :A financial tool for women empowerment in West Bengal with special reference to Bandhan Bank-Bijoy Gupta and Prof.Kartick Ch.Pal

15]Chinese Yuan enters into the basket of special drawing rights---Dr.Debesh Bhowmik.

All the papers are highly qualitative and future research deserving for students.

My paper—Page no-336-349

CHINESE YUAN ENTERS INTO THE BASKET OF SPECIAL DRAWING RIGHTS

Dr.Debesh Bhowmik

Keywords-Special Drawing Rights, Alternative weight of Yuan, Yuan /US$ exchange rate, ARIMA(1,1,1),AR(3),GARCH(1,1)

JEL-F31,F33,F55,F58,P34,

The paper analyses the approval of IMF for Yuan as one of the currency in the basket of SDR which will effect from 1-10-2016 showing the weight of Yuan as 10.92% as against 41.7% for US$, 30.9% for Euro , 8.3% for Yen and 8.1% for Pound Sterling respectively. An alternative weight for the SDR basket is proposed. 

The paper explained that the decision of IMF will boost internationalization of Yuan,will speed up the transition from managed float to freely floating exchange rate mechanism including reform of financial sector and capital account convertibility as well as bust in the equity and share markets. It might increase Chinese global export share and expect further depreciation of Yuan subject to increase in interest rate in Federal Reserve Bank.

The paper verified that Chinese gross and global shares of export and import are positively associated with gross SDR and global share of SDR during 1980-2013 which were observed by double log regression model but these variables were not cointegrated which are calculated by Johansen Cointegration Test. ARIMA(1,1,1) model is tested to show the stationarity of Yuan US$ monthly nominal exchange rate during 2010M1-2016M1. AR(3) process is applied to verify the volatility, stability and stationarity. Even GARCH(1,1) model including conditional variance were used to show high volatility during the specified period.

The paper emphasized that in the long run, China will lead the Asian and world capital market as well as Asian and global trade and finance as were observed in ancient past during 1300-1700.By 2030,Chinese global GDP share is projected as 33.4% as against 33.1% of USA. It is hoped that Chinese new status in the IMF might bring back as a catalyst to stabilize international monetary system with the emergence of SDR as a world reserve currency and as an unit of account for international payments mechanism if most of the countries peg their currencies with SDR which can converge international price level and increase global trade so that shortage of international liquidity might disappear and reestablishment of a new Bretton Woods III might evolve.

DYNAMIC EVOLUTION OF MANAGEMENT PARADIGM

Editors—Dr.Sudin Bag and Dr.Debashish Biswas(Department of MBA,Vidyasagar University,2016),Giri Printers,Price-850/-

REDEFINING BUSINESS VISION -ISSUES AND CHALLENGES, VOL-1

REDEFINING BUSINESS VISION-ISSUES AND CHALLENGES

VOL-1:ACCOUNTING AND FINANCE

Edited by –Sanjib Kumar Basu,Soumya Saha,Sumanta Dutta

Regal Publications,F-159,Rajouri Gardens,NewDelhi-110027

Price-Rs1440/-,pp-xiii+382

The book is the outcome of the presented papers in the one day seminar organized by Department of Commerce of St.Xavier’s College,Kolkata in collaboration with University of Calcutta sponsored by UGC

Held on 19March,2016.It includes a comprehensive  coverage of all the issues relating to accounting, and finance and volume-2 covered marketing and human resources.

The contains of the book is as follows.

1] Forensic Accounting:Its role on Fraud Detection(with reference to White Collar Crimes in India)-Hanzala Awais and Priyodarshini Rasquinha

2] Voluntary Disclosure of Corporate Environmental Practices,Corporate Governance and Market Responsiveness:A Longitudinal Study in Indian Context-Abhijit Roy and Sumanta Kumar Ghosh

3]Impact of Companies Act,2013 on Depreciation and its Reporting:A Study of Selected Indian Companies-Abhik Kumar Mukherjee and Subhra jyoti Mondol

4]Impact of IFRS on Voluntary Adopted IT companies in India:A case study of Infosys Ltd,and Wipro Ltd—Malay Ranjan Mahapatra

5]E-Governance Initiatives of Government of West Bengal:A study on its utilization—Uttiya Kar

6]Profitibility position of the commercial banking sector in India:An empirical study on public and private banks—Manidipa Das Gupta and Som Sankar Sen

7]Business Trust in India:A look into its Tax Implication—Prof.Shubhayan Basu

8]Business ethics and corporate social responsibility:Two emerging issues of corporate sectors in India—Suvankar Chakraborty

9]FDI inflows and economic growth in India:A Fusillade of questions-Souvik Mukherjee,Tanusree Das,and S.Kavitha

10]Interpretation of customer perception about life insurance:A study of south Delhi area—Monirul Islam

11]Economic growth,foreign direct investment and financial crises—Debesh Bhowmik

12]India’s economic performance during the pre and post crisis period:A comparative Analysis—Rajib Bhattacherjya

13]Investment in money instrument and precious metals in different  economic phases in Indian context—Sharmistha Ghosh and Tumpa Chakraborty

14] Comparative study  of TATA steel Ltd and SAIL in terms of liquidity and its relation  with profitability—Palash Bandopadhyay and Priyanka  Agarwal

15] Tail Risk Behaviour of the Indian banking  sector  in the context of financial crisis of 2007-08—Piyali Dutta Chowdhury and Basabi Bhattacharjya

16]Financial inclusion:A qualitative critique of recent  finiancial reform—Joyita Banerjee and Hanzala Awais

17]Exchange rate exposure and its determinants on stock returns at firm level around crisis periods:A study of India from 2000-2013---Soumya Saha

18]A study on Asset  liability management as risk management technique in commercial banks in India—Khushboo Thakkar

19]A study on increasing trend of NPA on self help group bank linkage programme—Mithun Das

20]A study on primary market pricing in conflict with  behavioural finance approach-Investors biasness---Sunita Ghatak

21]Financial inclusion through mobile banking :How much merit does it carry?—Debabrata Jana and Abhijit Sinha

22]Inclusion through microinsurance:A case study of Nadia District,West Bengal---Sreemoyee Guha Roy.

My paper—Article no-11,pp167-195

Economic Growth, Foreign Direct Investment and Financial Crises

Dr.Debesh Bhowmik

 (Retired Principal and associated in International Institute for Development Studies, Kolkata)

Email-debeshbhowmik@rediffmail.com

Key words- Foreign Direct Investment, economic growth, financial crises,currency crisis,banking crisis,sovereign crisis

JEL-C23,C33, F21,F01,O55

I.Introduction

Foreign Direct Investment has several dimensions. It affects host countries balance of payments and development process. It has long run effects on economic growth and sustainable development which depend on the character of FDI. However, the nexus between growth and FDI is indeterminate since it varies from region to region, country to country and from period to period although the globalization, liberalization and privatization drives accelerated the speed of the nexus towards positive direction irrespective of the distribution of income. Historically, FDI changes from merchants’ capital to multinational investments, from imperialistic attitude to trade domination through economic integration (via financial integration) in international trade and finance.

FDI does not cause crises directly, but it has indirect causes of bubbles and busts. Debt finance through FDI may stimulate debt burden under recession. Financial and banking crises may emerge if FDI in banking sector find losses and shut downs. Yet we cannot avoid the fact that FDI does not Granger cause of financial crises but financial crises do Granger cause FDI changes which were observed in all the financial crises in the world .

Since the Baring crisis in 1870, India’s FDI was dominated by British imperialism through East India Company whose chief competitors were Dutch East India Company, Danish East India Company, Portuguese East India Company, French East India Company and Swedish East India Company respectively. In 1913, India’s foreign investment stood 35% of GDP  and per capita foreign investment was 6 dollar at 1900 US dollar and foreign direct investment as percent of domestic capital stock was 9% and FDI as of GDP is 19.39% in 2014.The highest share was occupied by Mauritius,36%, followed by Singapore,12%,UK ,10%,Japan,8%,and USA,6% respectively. Service sector is leading the sectoral distribution of FDI ie 18%, followed by construction development,11%,telecommunication and computer ,6% each, and drug and pharmaceuticals, 5% respectively in 2013-14 .

This paper will endeavour to verify nexus between FDI and growth in Indian economy using econometric analysis and studied analytically the changes of FDI during crises.

II. Literature review

The nexus between Growth and FDI inflows varies from country  to country, from one period to another and from one sector to other in which there are many economic literatures that represent economic relevance. Ragimana(2012) studied that FDI growth nexus is positive in Solomon Island during 1970-2010 which was verified through Granger Causality test and Co-integration test. Adelake(2014) found that FDI has positive overall effect on economic growth in Sub-Saharan Africa, although the magnitude of this effect depends on some country specific features during 1996-2010 of 31 SSA countries of panel data where role of governance should positive on encouraging FDI inflows. Tintin(2012) showed that FDI spurs economic growth and development in developed ,developing and the least developed countries which was found from the study of a sample of 125 countries (38 developed,58 developing and 29 least developed countries) over the 1980-2010 period by using least square method of the panel data. Stehrer and Woerz(2009) verified the relation in OECD and non OECD countries during 1981-2000 and found that a 10% increase in FDI can increase 1.2% in growth rate per year. Li and Liu(2005) studied 84 countries using data of 1970-1999 period and concluded that a 10% increase in FDI can stipulate 4.1% growth rate per year. Johnson(2006) took 90 developed and developing countries using data of 1980-2002 period and concluded positive relation through OLS method. Ewing and Yang(2009) studied 48 states in USA during 1977-2001 in manufacturing sector and found direct relation between growth and FDI. Hansen and Rand(2006) used co-integration and causality tests in 31 developing countries during 1970-2000 and showed positive relation.Herzer et.al(2008) verified the nexus in 28 developing countries during 1970-2003 and found positive nexus. Nair (2010) showed that FDI has a positive and highly significant effect on overall growth in India during 1970-2000 in regression results which leads to an increase in market size.The result proves that it cannot be rejected that the FDI does not Granger cause GDP growth at the 5% level, but it can be reflected that GDP growth does not Granger cause FDI.Tiwari and Mikhai(2011) verified that exports and FDI show a significant and positive impact on economic growth in a panel of 23 Asian countries during 1986-2008.Chakraborty and Basu(2002) suggest that GDP in India is not Granger caused by FDI ,the causality seems to run more from GDP to FDI.Oluwatosin,Oluoegun,Fetus and Abimbola(2012) showed that FDI has positive linkage over economic growth in five ECOWAS countries during 1970-2005 which was verified through Granger causality tests in VEC model. Yesuf and Tsehaye(2012) investigated the causal link between FDI and economic growth in Ethiopia during 1974-2010 and did not find any causality running from FDI to growth or vice versa but there was an evidence of co-integration between FDI and growth. The flow of FDI is too small to translate into growth. Using the VAR Granger causality/Block Exogeneity Wald Test in Cote d’Ivoire during 1980-2007,N’guessan and Yue(2010) concluded that there is a long run relationship between FDI, trade openness and growth which stated that about 10% increase in trade openness would lead to about 97% growth of output and 10% increase in FDI would result in about 1% in growth of output.

The UNCTAD study which covers 140 countries over the period 1998-2000 with 8 explanatory variables  show that FDI can be explained in terms of GDP per capita, exports as a percentage of GDP and telephone lines per 1000 of the populations. In general terms the results tell us that countries that are more successful in attracting FDI are developed countries with a high degree of

openness. Factors failing the EBA robustness test as determinants of FDI inflows included: GDP growth rate, commercial energy use, R&D expenditure, tertiary enrolments and country risk.

Anyanwu (2012) estimated from cross-country regressions for the period 1996-2008 which indicate that: (i) there is a positive relationship between market size and FDI inflows; (ii) openness to trade has a positive impact on FDI inflows; (iii) higher financial development has negative effect on FDI inflows; (iv) the prevalence of the rule of law increases FDI inflows; (v) higher FDI goes where foreign aid also goes; (vi) agglomeration has a strong positive impact on FDI inflows; (vi) natural resource endowment and exploitation (such as oil) attracts huge FDI; (vii) East and Southern African sub-regions appear positively disposed to obtain higher levels of inward FDI.

Applying vector error correction model, Dinda (2009) empirically investigated the determinants of foreign direct investment inflows to Nigeria during 1970-2006. This study suggests that the endowment of natural resources, openness, macroeconomic risk factors like inflation and exchange rates are significant determinants of FDI inflows to Nigeria.

 III.Economic growth-foreign direct investment nexus: A Case Study of India

[i] Methodology and data

 I have assumed the co-integrating model of foreign direct investment in the following manner,

Y = f( x₁,x₂ x₃,x₄ ,x₅)

Where Y= foreign direct investment inflows in million US dollars

X₁= GDP growth rate per cent per year

X₂= Degree of openness ( measured by (export+import)/2/GDP )

X₃= Total external debt in million USdollars

X₄= interest rate (lending rate as per availability in time series)

X₅= exchange rate ( nominal rate with respect to US dollar)

We have collected data from the World Bank,Reserve Bank of India, UNCTAD for the year from 1990 to 2013.For co-integration analysis we use Engle and Granger(1987) , Johansen (1991,1996) and Johansen and Juselius (1990) methodologies.

******* VII.Concluding remarks

Taking GDP growth rate, degree of opennesss, total external debt, interest rate and exchange rate as the important determinants of FDI in India during 1990-2013, the paper verified that the Engle-Granger methodology showed that there is co-integrating relationship where degree of openness and interest rate are significant where as Johansen test proved that there are 5cointegrating vectors  in the level series, 5 cointegrating vectors in the first difference series and 5 cointegrating vectors in the log series respectively. The VECM verified  that there are serial correlation and ARCH error with non-normal distribution where all roots lie inside the unit circle including 5 unit roots but impulse response functions do not approach to zero and error correction terms and residual systems are explosive.

In concluding remarks we like to mention that a country which has a stable macroeconomic condition with high and sustained growth rates will receive higher FDI inflows than a more volatile economy. Therefore, it is expected that GDP growth rate, industrial production, and interest rates would influence FDI flows positively and the inflation rate would influence positively or negatively. Market size plays an important role in attracting foreign direct investment from abroad. Market size is measured by GDP. Market size tend to influence the inflows, as an increased customer base signifies more opportunities of being successful and also the fact that with the rampant development the purchasing power of the people has also been greatly influenced moving to many levels higher in comparison to what it was before the economic growth.

The paper also concludes that FDI does not cause Granger financial crises but financial crises do cause Granger FDI. In every financial crisis since 1890,FDI changes downward but in Euro crises and US subprime crises, FDI did not decline in most of the East Asian countries. The declining growth and FDI in all financial crises were the general phenomenon. Also in India, financial crises had negative impact on FDI and growth.