How FDI and Inflation Influence Economic Growth in India: An Econometric Investigation.

Abstract

This study investigates the nexus between foreign direct investment (FDI), inflation, and economic growth in India. The analysis employs the autoregressive distributed lag (ARDL) model and the bounds testing approach to examine long-run cointegration among these variables. Additionally, the error correction model (ECM) is applied to assess short-run dynamics. The empirical results confirm a stable long-term relationship between FDI, inflation, and economic growth. Furthermore, the findings indicate that FDI inflows and inflation exhibit a positive yet statistically insignificant impact on economic growth. Based on these outcomes, the study recommends that implementing more favorable government policies toward FDI could enhance the dynamism of the Indian economy.