BOOK RELEASED

ISSUES ON TRIBAL DEVELOPMENT HAS BEEN RELEASED ON 15 MAY,2018 IN BHAIRAB GANGULI COLLEGE,KOLKATA DURING WORKSHOP.

THE BOOK IS RELEASED BY VICE CHANCELLOR OF WEST BENGAL STATE UNIVERSITY,KOLKATA

Issues on Tribal Development

Editors

Dr. Debesh Bhowmik

Sourav Kumar Das

In collaboration with

Belur Research Association of Social Science, Kolkata

93/2/4, Dharmatala Road, P.O: Belur Math,

District: Howrah, State: West Bengal, India, Pin: 711202

Registration No.: S/2L 56036 of 2016–17

email: brassindia2016@gmail.com

Publisher---RUPALI, KOLKATA

The book consists of 18 articles.The foreword has been written by Prof. Dr. Ratnakar D B

Director (Academics), International Multidisciplinary Research Foundation, India.

President, RPM Research & Educational Society, India.

Member, Board of Directors, DRPF University, Macedonia. Member, Centre for Scientific Research & Education, Sri Lanka.

It covers wide range of themes on tribal development .About historical development on tribe, Dr.Debesh Bhowmik studied about the origin, evolutionary process in ancient India, categories of tribes in Europe, America, Africa and their livelihood patterns. On political development, the problem of displacement of tribes was explained through an article of Nidhi Chowdhury. There are innumerable Sociological factors allied with history which affect the development of tribes that is explained in an important article written by Prof.Kousik Chattopadhyay. Prof.Sudin Chattopadhyay ,in his essay,expressed that Santhals were Historically  oppressed,deprived and were treated as slave during British empire

in India. How did they unitedly revolt against British colonial rule was exclusively designed by the author.Prof.Gustavo Pcho explained the socio-political status of the tribes of Peru showing their housing,food,livelihood,recognition and employment scenario in comparison to general citizens in a nice way.On gender studies of tribes, emphasis was given to inequalityof educational opportunities, employment opportunities, social deprivation and exploitation and women empowerment by Prof Ramnaresh Thakur and Shib sankar Hembram. Consumption

patterns and consumption variation of different tribes of West Bengal were theoretically and empirically examined in a nice way by Sourav Kumar Das,Jagannath Biswas and Soumik

Majumder. Health care facilities, infrastructure of tribal health care, tribal diseases, recommended health policies of tribes in India have been incorporated from the studies of Suvojit Pahari and Dr.Debesh Bhowmik .Literacy problem and of tribal education

and educational attainments of tribes in India are clearly shown in three articles,one by Debjani Mitra (Sarker) and Sudipta Sarker , two by Prof C.B.Singh and Prof.Ankita Jasmina Lall and three by Dr.Aruni Kumar. Socio-economic and cultural development of tribes in the Tharus of Uttarakhand were exemplified by Prof.D.K.P.Chaudhary and Prof.Manoj Kumar Tripathi. On finance and entrepreneurship of tribes, role of micro-finance among tribal women households and other male tribes in tribal areas of West Bengal have been emphasized by an article of Bhajan Chandra Burman. Causes of poverty, poverty stricken tribes in Indian

provinces and the policies of amelioration are also included in this book written by Dr.Bibekananda Basu. Employment opportunities of tribes through MGNREGS in tribal districts of West Bengal were empirically studied by Prof.Kishore Naskar. Prof. Debasish Biswas showed the impact of deforestation and forest policy of India on the tribal people who have been suffering a lot in housing and livelihood especially in North-East India.

This book will be helpful to the students who work in the areas of tribal development.This book may be useful to the policy makers too.

Chapter 1

Tribal Development: History and Theory

In Search of the Tribes around the World

Debesh Bhowmik ................................................................................................3

From Jana to Nitibe: A Critique of Postmodern Concept nationalization

of Tribal Development

Kaushik Chattopadhyay....................................................................................44

Debating Tribal Disadvantages: Development Induced Displacement

Nidhi Chowdhary..............................................................................................73

The Santhals and The Hool of 1855

Sudin Chattopadhyay........................................................................................83

Chapter 2

Gender Studies on Tribal Development

Gender Inequality in Education among the Tribes of West Bengal

and Related Issues

Shibthakur Hembram........................................................................................92

Problems of Tribal Women: Obstacles in the Way of Development

Ram Naresh Thakur........................................................................................ 110

Chapter 3

Consumption, Health and Education Status of Tribes

Literacy among Tribes in India

Aruni Kumar................................................................................................... 132

Theoretical Background of Consumption Variation of Major Tribes

Across Regions in West Bengal

Sourav Kr Das, Jagannath Biswas and Soumik Kanti Ghosh........................142

x Issues on Tribal Development

Glipse of Tribal Education in India

Debjani Mitra and Sudipta Sarkar.................................................................174

Health Issues in Tribes in West Bengal: A Critical Appraisal

Suvojit Pahari and Debesh Bhowmik.............................................................190

Chapter 4

Socio-Economic Development of Tribes

Socio-Economic Development of Tribes in India

C.B.Singh and Ankita Jasmina Lall................................................................208

SHIPIBOS – KONIBOS IN LIMA: The Struggle of an Amazonian

Native Town In A Jungle Of Concrete

PechoPecho, Elias Gustavo............................................................................222

Forest or Farm: Conservation and Impact of Relocation

on the Tharus of Uttarakhand

D.K.P. Chaudhary and Manoj Kumar Tripathi...............................................238

Chapter 5

Finance and Enterpreneurship of Tribes

Impact of Micro Finance on Tribal Household: A study of Jangal Mahal

Area of Bankura District

Ratan Saha...................................................................................................... 251

Micro-Finance and Development of Tribal Women: A case study

Bhajan Chandra Burman................................................................................264

Chapter 6

Poverty and Inequality of Tribes

On Poverty and Tribal Development

Bibekananda Basu..........................................................................................279

Chapter 7

Employment opportunity of tribes

Performance of Mahatma Gandhi National Rural Employment Gurantee

Scheme(MGNREGS) in West Bengal with Special Reference to Tribal

Region (Bankura, Paschim Medinipur and Purulia)

Kishore Naskar...............................................................................................302

Chapter 8

Forest Resource, Forest Policy and Tribal Development

Movement of Tribals to Save the Biodiversity of Forest with Special

Reference to North-East India

Debasish Biswas.............................................................................................338

Bibliography ..................................................................................................349

An Econometric Analysis of World GDP Share of India during 1960-2015

SocioEconomic Challenges, Volume 2, Issue 1, 2018
(SUMY STATE UNIVERSITY,UKRAINE)

An Econometric Analysis of World GDP Share of India during 1960-2015

Debesh Bhowmik
PhD, Retired Principal and Associated with The Indian Econometric Society, India

Abstract

In this paper author attempted to analyse India’s international GDP share during 1960-2015 with the help of econometric models taking the data from the World Bank. Semilog linear trend model and exponential trend model were used to find the 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) model was tested for the stationary of the series. Forecast for 2035 of the AR(1) and ARIMA(1,1,1) models verified stationary long term patterns. Bai-Perron (2003) model explained to show structural breaks and the study of Bartoletto, Chiarini, Marzano & Piselli (2015) was followed to compute peaks, troughs, durations of cycles, amplitudes and slopes of both the short and medium cycles during 1960-2015. Hodrick-Prescott Filter (1997) model minimized the cycles for smoothness of trend of GDP share.The paper concludes that international GDP share of India has decreased at the rate of 0.459% per year during 1960-2015 and declined exponentially at the rate 0.259% per year significantly. The growth rate of the GDP share is downward sloping significantly till 2030.
It follows random walk without drift. Its AR(1) is stable, convergence and stationary. Forecast for 2035 of AR(1) is also converging. ARIMA(1,1,1) is stable and non-stationary and suffers from AC and PAC problems. Its forecast model for 2035 is tending towards stationary insignificantly. GARCH (1,1) showed excessive volatility. It has two downward structural breaks in 1968 and 1988 and one upward break in 2006 which are significant. The paper verified short and medium cycles to calculate peaks and troughs, duration of downturn and upturn, amplitude and slope of the cycles respectively. HP filter model makes the cycle more smooth with only one trough assuming lamda comprises 1600 but symmetric and asymmetric filter showed two peaks and two troughs. The frequency response function clarified its peaks and amplitude of cycle clearly.Keywords: international GDP share, exponential growth, structural break, non-stationary, HP filter, peaks,trough.

JEL Classification: N13, N15, O21, O24, O57, O10.
© The Author, 2018. This article is published with open access at Sumy State University.

1. Introduction

The world’s GDP share of India is an important indicator which can explain the nature of Indian economic development in comparison to other international economies. During ancient past of economic development of India, it was evident that India’s world GDP share was highest till 1500 AD and India was the dominant country. During 1500-1650, China was dominant followed by India, and then during 1650-1750, India was dominant followed by China. Since 1870, the world scenario changed rapidly due to rise in western civilization and industrial revolution where Europe was the dominant country and India and Chinese GDP started to decline rapidly. After the First and the Second World Wars, USA’s dominance in trade, finance and commerce outweigh UK dominance and USA became the largest GDP share holder in the world up till now. And India’s share has been falling till 1993, and then upswing started in but it is too little in comparison to other nations. During 1AD, India’s share was 33%,followed by 30% in 1000AD,24% in 1500-1700AD, 17% in 1820AD,7% in 1913, and now it is 2.79% in 2015 respectively. But, within 2025, China will recover his previous historical dominance in terms of GDP in the world. In Figure 1, India, China and other nations’ world GDP shares are plotted during 1AD-2008AD for comparative study.

http://armgpublishing.sumdu.edu.ua/journals/sec/volume-2-issue-1/article-4/

Financial Crises and Nexus Between Economic Growth and Foreign Direct Investment

Financial Markets, Institutions and Risks, Volume 2, Issue 1, 2018

(Sumy State University,Ukraine)

Financial Crises and Nexus Between Economic Growth and

Foreign Direct Investment

Debesh Bhowmik

Dr., Retired Principal and Associated with International Institute for Development Studies, Kolkata, Life member, Indian Economic Association, The Indian Econometric Society, Bengal Economic

Association, Ex.Associate Editor-Arthabeekshan-The Journal of Bengal Economic Association,Residence, India.

Abstract

In this paper, author tried to find relation of foreign direct investment inflows with its determinants like growth rate, interest rate, exchange rate, inflation rate, fiscal deficit, openness in India during 1971-2015 through causality, co-integration and vector error correction models. In this paper, it was attempted to explain clearly that how foreign direct investment inflows and outflows have changed during several financial crises in different regions of the world since 1970s in support with a historical analysis over global financial crises. The paper concludes that FDI inflows in India has been catapulting at the rate of 21.56% per year during 1971-2015 and exponentially at the rate of 0.6044% per year significantly. It has four upward structural breaks in 1985, 1994, 2000 and 2006 respectively during the specified period. FDI inflows in India has causal relation uni-directionally with fiscal deficit, and bi-directionally with inflation, exchange rate, interest rate and growth rate during 1971-2015.Johansen co-integration test confirmed that Trace Statistic contains four co-integrating equations and Max Eigen Statistic has three co-integrating equations. VECM is stable, non-stationary and not

good fit for four estimated equations and error corrections for the equations of change of interest rate and inflation rate showed significant with speeds of 23% and 103% per year. The paper also concludes that FDI does not cause Granger financial crises, but financial crises do cause Granger FDI.

Keywords: Foreign Direct Investment, economic growth, financial crises, co-integration, vector error correction.

JEL Classification: C23, C33, F21, F01, O55.

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%.Presently,India’s FDI inflows is very low in comparison to other countries ,e.g. in 2017 , India’s FDI was accounted as 1.9% of GDP and government of India expects it to rise to 2.5% of GDP with in next five years. In 2017, Mauritius was the top donor country to India comprising 11.47 billion US Dollar followed by Singapore 5.29 billion US Dollar, Netherlands 1.95 billion US Dollar, USA 1.33 billion US Dollar and Germany 934 million US Dollar respectively. As on 2017, Service sector is leading the sectoral distribution of FDI i.e. 8.68 billion US Dollar followed by

telecommunication 5.56 billion US Dollar, Computer hardware and software 3.65 billion US Dollar, Trading..............

APPLICATIONS OF ECONOMETRICS IN ECONOMICS---BOOK REVIEW

BOOK REVIEW-- In Financial Markets, Institutions and Risks, Volume 2, Issue 1, 2018,Ukraine Sumy State University. 

BY

PROF.DANTE A.URBINA

LIMA,PERU

Application of Econometrics in Economics

Dante A. Urbina

University of Lima.

© The Author, 2018. This article is published with open access at Sumy State University.

Bhowmik, D. (2017). Applications of Econometrics in Economics. New Delhi: Synergy Books, 332 pages,

1695 rupees, ISBN 978-93-82059-49-3.

According to Karl Popper, one of 20th century’s greatest philosophers of science, “theories are nets cast to

catch what we call ´the world´: to rationalize, to explain, and to master it”. And that is right. Scientists and

researchers seek to catch reality by mean of theories. In the case of economics, we seek to catch “economic

reality”. We have economic theories. In fact, there are several approaches within economic theory (neoclassical

economics, behavioral economics, institutionalism, post-Keynesianism, etc.). But we need specific tools and

methods in order to evaluate in a rigorous way the connection between our theories and economic reality. In

that context, econometrics become a very important aspect of research in economics.

So, in the book Applications of Econometrics in Economics, which is a compilation of Debesh Bhowmik’s

papers, we can find several demonstrations of this in practice since Dr. Bhowmik shows how econometrics

can be used in several ways to perform interesting and relevant research with respect to different aspects of

economic reality (namely, growth, inflation, employment, productivity, crisis, international trade,

globalization, financial integration, poverty, inequality, etc.). In that vein, he writes: “Nowadays, quantitative

economics plays an important role in theory and in practice where econometric models and their applications

in the economic analysis have acquired both the educational values and policy prescriptions” (p. xvii).

Basically, the econometric applications in the book are focused on time series analysis. For example, in the

paper “Causes behind the euro crisis”, Bhowmik uses ARIMA and GARCH models and he find that “nominal

euro/dollar exchange rate is stationary, convergent and volatile during 1999Q1-2015Q2” (p. 1). In addition,

there are several papers which use cointegration analysis like “An analysis of convergence and cointegration

of sectoral shares and growth in India”, “Cointegration between world trade, gold and SDR” and “Convergence

and cointegration of credit deposit ratio and Indian economic growth”. Relevant tests as the Granger causality

test are also applied and interesting results are obtained. For instance, in the paper “Economic growth, foreign

direct investment and financial crisis” it is found that “FDI does not cause Granger financial crises but financial

crises do cause Granger FDI” (p. 57). The book also includes applications of VAR models, which have the

important advantage that they allow to avoid endogeneity problems given that in this kind of models all the

variables are considered as endogenous. Thus, in the paper “Cointegration and VAR analysis in Indian growthunemployment-inflation linkages” it is concluded that “the policy makers should choose either inflation or

unemployment as the target variable to achieve specified growth rate and formulate other macroeconomic

policies” (p. 191). We can also find applications of the specific variant known as vector error correction model

(VECM). For example, in the paper “Is there any relation between gold price and inflation in India” one of the

main results is that “the estimated VECM states that the first difference gold price is significantly related with

the change of inflation rate (percentage change in CPI) and the change of WPI [wholesale price index] of the

previous periods and even related with the change of gold price of the previous period significantly” (p. 231).

However, it must also be said that the book has limitations. As was mentioned previously, it has several

applications of time series analysis. But there are no detailed applications of data panel analysis (in general

this is only mentioned in the section “Literature review” of some papers). So, I am very much of the opinion

that it would be valuable to include that in a next edition of the book because data panel methods (random

effects models, fixed effects models, Arellano-Bond estimators, panel cointegration analysis, etc.) are very

important in applied research.

By other hand, Bhowmik’s discussions also include valuable comments about the conditions for a rigorous

application of econometric tools. For example, in the paper “Poverty, inequality and globalization with special

reference to India”, he says: “India’s database is very poor in comparison to other developed nations. The

collection, compilation and interpretation data through NSS should be more scientific and modernized. More

emphasis must be given in collecting time series data in poverty, inequality and globalization so that policy

prescription through measuring modern tools can be applied in the framework of planning” (p. 278).

Thus, it is clear that Dr. Bhowmik’s book is of considerable importance for applied econometricians because

it addresses very diverse topics using different econometric tools with great mastery. Of course, like any

econometric analysis and result, what is presented in this book is debatable because it depends on numerous

methodological and procedural choices. But this is something that affects every work of applied econometrics.

The point is that, if we have the data (which would be our quantitative connection with reality), we can validly

discuss different methodological approximations in order to “catch” economic reality in quantitative models

with relevant qualitative meaning. In that context, the book explains in detail how data is processed and this

allows the discussion. And from discussion comes out the light. So, this book will help to illuminate our path

to a better and deeper understanding of economic reality.

BOOK RELEASE

THIS BOOK IS RELEASED DURING THE UGC ,SAP (DRS-1) SUPPORTED INTERNATIONAL SEMINAR IN VIDYASAGAR UNIVERSITY,DEPARTMENT OF ECONOMICS, MIDNAPORE, 28-29 MARCH,2018 

ECONOMETRIC  APPLICATIONS

by

Dr.Debesh Bhowmik

MANGLAM PUBLISHERS AND DISTRIBUTORS

K-129,GROUND FLOOR,GALI NO-3,3-1/2 PUSTA,GAUTAM BIHAR,ND-110053

manglam.publishers@rediffmail.com

www.manglampublications.com

pp380,price-1450/-

The book consists of 15 research articles on econometric applications in the areas of fiscal deficit,infrastructure,female unemployment,growth –unemployment nexus,exports,non-perorming-assets,ecommerce,rupee/dollar nominal exchange rate and real effective exchange rate,silver standard,growth-inflation nexus, agricultural productivity and growth nexus,and small scale industries sectors respectively.Some of the papers have been presented in the seminars and conferences and some are published in journals.I have compiled those articles in a book form because it may help to the students and teachers of econometrics who use frequently econometric models.This book may be useful to the professionals and policy makers who apply econometrics in economic policy frameworks.

Contents

Foreword

Preface

Acknowledgement

List of Figures and Tables

Chapter-1: Macro Economics of India’s fiscal deficit and fiscal convergence of Indian States

Chapter-2: Infrastructure, Economic Growth And The Economy Of Bihar

Chapter-3: Relation Between GDP Growth Rate And Unemployment Growth Rate In India Since The Reform Period

Chapter-4: Non Performing Assets And Its Relation With  Advance,Lending Rate And GDP In Indian Banking Sector

Chapter-5: The Trends And Determinants Of Indian Exports:An Econometric Analysis

Chapter-6: India’s Retail Sales of ECommerce: An Econometric Analysis

Chapter-7: Rupee USDollar Nominal Exchange Rate Of India: Behaviour,Cointegration And Vector Autoregression

Chapter-8: Global Female Unemployment: An Econometric Study

Chapter-9: B.R.Ambedkar and Silver standard in India

Chapter-10: Growth-Inflatio Nexus : Threshold Model Of Inflation In India

Chapter-11: Behaviour and determinants of Real Effective Exchange Rate of India

Chapter-12: Agricultural Productivity and Economic Growth in India

Chapter-13: Capital inflows and Silver Standard in India

Chapter-14: Retail Sales Of E-Commerce In India And USA:A Comparative Study

Chapter-15: Econometric Analysis of the performance of SSI sector in India during 1980-81-2014-15

debeshbhowmik@rediffmail.com

RELEASE OF BOOK ON APPLICATIONS OF ECONOMETRICS IN ECONOMICS

APPLICATIONS OF ECONOMETRICS IN ECONOMICS

     By 

Dr. Debesh Bhowmik

SYNERGY BOOKS INDIA ,NEW DELHI (www.synergybooksindia.com

Price- 1695/-

The Foreword of this book is written by Prof. Dante A. Urbina Padilla,

National University of San Marcos ,Lima,Peru 

Contents

1.Causes of Euro crises

2.Economic growth ,foreign direct investment and financial crises

3.An analysis of convergence and cointegration of sectoral shares and growth in India

4.An econometric model of Inflation in India

5.Bangladesh-India trade financial integration linkages

6.Cointegration between world trade ,gold and SDR

7.The nexus between productivity and employment 

8.The nature of Indian GDP growth rate

9.Cointegration and VAR analysis in Indian growth -unemployment -inflation linkages

10.Indo-Bangladesh trade financial integration linkages

11.Is there any relation between gold price and inflation in India?

12.Convergence and cointegration of credit deposit ratio in India

13.Poverty,inequality and globalisation with special reference to India.

14. Indo-China Trade ,Yuan in SDR basket and world economy

15.Daily exchange rate behaviour of special drawing right per yuan   

Bibliography

Subject Index

Today (23 March ,2018) at Rabindra Bharati University ,the book is released on the seminar" Human Development  in India :A State level Analysis" in the Centre for Human Development Studies,

Kolkata  

Foreign Direct Investments (FDIs) and Opportunities for Developing Economies in the World Market

by

Venkataramanaiah Malepati (University of Gondar, Ethiopia) and C. Mangala Gowri (University of Gondar, Ethiopia)

Release Date: December, 2017|Copyright: © 2018 |Pages: 315

ISBN13: 9781522530268|ISBN10: 1522530266|EISBN13: 9781522530275|DOI: 10.4018/978-1-5225-3026-8

Chapter 1:Foreign Direct Investment, Technological Innovation, and Export Performance: Empirical Evidence From Developing Asia (pages 1-24)—by-Arzu Tay Bayramoglu, Tezcan Abasız

Chapter 2:Determinants of FDI Inflows in Developing Countries: A Dynamic Panel Approach (pages 25-45)—by--Dinesh Kumar Choudhury, Prabhakara Rao

Chapter 3:The Role of Foreign Direct Investment in Less-Developed Countries (pages 46-65)-by-

Chengchun Li, Sailesh K. Tanna

Chapter 4:Socio-Economic Impact of Foreign Direct Investment in Developing Countries (pages 66-81)-by-Christopher Boachie, Eunice Adu-Darko

Chapter 5:FDI as a Factor of Improving the Competitiveness of Developing Countries: FDI and Competitiveness (pages 82-104)-by-Ivana S. Domazet, Darko M. Marjanović

Chapter 6:The Relative Importance of Trade vs. FDI-Led Economic Growth in Thailand (pages 105-122)-by-Sailesh Tanna, Kitja Topaiboul, Chengchun Li

Chapter 7:FDI Inflows and Current Account Evidence From BIMSTEC (pages 123-141)-by-

Nida Rahman, Shehroz Alam Rizvi

Chapter 8:The Comparative Study of the FDI in India and China in Retail Sector (pages 142-168)

-by-Rita Naraindas Khatri

Chapter 9:M&A vs. Greenfield: FDI for Economic Growth in Emerging Economies (pages 169-185)

-by-Sana Moid

Chapter 10:Patterns of Technology Acquisition: Upstream Linkages Between MNEs and Local Suppliers (pages 186-212)-by-António Carrizo Moreira

Chapter 11:The Role of Governance on Foreign Direct Investment Inflows: A New Theoretical Perspective and Cross-Country Analysis (pages 213-247)-by-Adem Gök

Chapter 12:Econometric Analysis of India's Foreign Direct Investment Inflows (pages 248-275)

-by-Debesh Bhowmik

Chapter 12

Econometric Analysis of India’s Foreign Direct Investment Inflows

Debesh Bhowmik(International Institute for Development Studies, Kolkata, India)

ABSTRACT

In this chapter, the author explains the trend lines, random walk, stationary,

structural breaks, and volatility of FDI inflows in India during 1971-2015. Both

log linear and exponential trends are significant. FDI inflows are stationary and

showed four structural breaks in 1985, 1994, 2000, and 2006. The 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 is

added. Policy recommendations are also included.

INTRODUCTION

Foreign direct investment (FDI) is an investment in a business by an investor from

another country for which the foreign investor has control over the company purchased.

The Organization of Economic Cooperation and Development (OECD) defines

control as owning 10% or more of the business. Businesses that make foreign direct

investments are often called multinational corporations (MNCs) or multinational

enterprises (MNEs). FDI provides a win – win situation to the host and the home countries. FDI as a strategic component of investment is needed by India for its

sustained economic growth and development. FDI is necessary for creation of jobs,

expansion of existing manufacturing industries and development of the new one.

Indeed, it is also needed in the healthcare, education, R&D, infrastructure, retailing

and in long term financial projects. Need of FDI depends on saving and investment rate

in any country. Foreign Direct investment acts as a bridge to fulfill the gap between

investment and saving. In the process of economic development foreign capital helps

to cover the domestic saving constraint and provide access to the superior technology

that promotes efficiency and productivity of the existing production capacity and

generate new production opportunity. Foreign investments mean both foreign portfolio

investments and foreign direct investments (FDI). FDI brings better technology and

management, marketing networks and offers competition, the latter helping Indian

companies improve, quite apart from being good for consumers. The effectiveness

of FDI in bringing about the desired growth may be constrained by the level of

infrastructural developments and other macroeconomic variables . Infrastructural

development, openness and domestic market size are major determinants of FDI.

Even, exchange rate and interest rate may influence FDI inflows. Besides, balance of

payments adjustment is a good correlation with FDI flows. Political instability and

financial crises influence FDI flows negatively. Alongside opening up of the FDI

regime, steps were taken to allow foreign portfolio investments into the Indian stock

market through the mechanism of foreign institutional investors. The objective was

not only to facilitate non‐debt creating foreign capital inflows but also to develop the

stock market in India, lower the cost of capital for Indian enterprises and indirectly

improve corporate governance structures. FDI have helped India to attain a financial

stability and economic growth with the help of investments in different sectors. FDI

has boosted the economic life of India.

By allowing MNC in Indian economy, the government of India with the help of

World Bank and IMF introduced the macro-economic stabilization and structural

adjustment program. As a result of these reforms India open its door to FDI inflows

and adopted a more liberal foreign policy in order to restore the confidence of foreign

investors. Further, under the new foreign investment policy Government of India

constituted FIPB (Foreign Investment Promotion Board) whose main function was

to invite and facilitate foreign investment.

OBJECTIVE OF THE STUDY

In this paper, the author endeavors to explain the patterns of behavior of India’s foreign

direct investment inflows during 1971-2015. Besides, the author tries to relate FDI

inflows with macro variables like growth rate, interest rate, inflation rate, exchange

………………….read from

www.igi-global.com/chapter/econometric-analysis-of-Indias-foreign-direct-Investment-inflows/198812