Empirical Economics

, Volume 45, Issue 1, pp 217–238 | Cite as

FDI, services trade and economic growth in India: empirical evidence on causal links

  • Ranjan Kumar DashEmail author
  • P. C. Parida


This article examines the linkages between inward FDI, services trade (export and import) and economic output using co-integration and VECM causality test. These linkages have been explored both at the aggregate and at the sectoral levels (manufacturing and services). The empirical findings confirm the long-run relationship among these variables. Causality results indicate the presence of bi-directional causal relationship between FDI and economic output as well as between services exports and economic output. The results also bring out feedback relationship between services export and FDI, reconfirming the presence of complementary relationship between the two. At the sectoral level, we find at least a unidirectional causality from FDI and services exports to both manufacturing and services output and also cross-sectoral spillover effects from manufacturing output to services output and vice versa.


FDI Services trade Economic growth Co-integration VECM causality 

JEL Classification

E23 E24 F13 F2 O54 


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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.ICRIERNew DelhiIndia
  2. 2.NCAERNew DelhiIndia

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