Impact of FDI on Automobile Sector in India – An Empirical Analysis

By : Jeena Mariot Xavier , K V Raju

Page No: 394-403

Abstract
This article tries to analyse the linkages between and spillovers from foreign parent firms to foreign subsidiaries in host country’s automotive industry. Conceptually, the article identifies spillovers, linkages and the effects of foreign direct investment (FDI) on domestic firms. We analyse the linkage channels of six major automobile manufacturers in India. The compound annual growth rate of FDI equity inflows is analysed using semi-log model and the average domestic input share is utilized to form linkage effect. Regressing the average sales of each firm on linkage gives the spillover effect of linkage channel on average sales of the firms. CAGR of FDI is 11.35 per cent for the period of study. Maruti Suzuki India Ltd and Honda Cars India Ltd have a significant spillover effect of linkages in the FDI on average sales of the firm. We cannot ignore the role of FDI in generating linkages, spillovers and technological transfers. Effective policy measures, FDI-friendly policy regimes, attractive incentives, pro-manufacture environment are essential in driving more FDI in automobile sector.

Authors :
Jeena Mariot Xavier : Research Scholar, Sacred Heart College, Thevara and Assistant Professor of Economics, Maharaja’s College, Ernakulam.
K V Raju : Associate Professor and Research Guide, Department of Economics, Sacred Heart College, Thevara, Ernakulam
 

DOI: https://doi.org/10.32381/PROD.2021.61.04.3