Foreign Direct Investment and Inclusive Growth in India: A Comparative Sectoral and Regional Perspective

By : P. Paramashivaiah, Shreya Chakraborthy

Page No: 316-325

Abstract
This research paper provides a comprehensive and in-depth analysis of the impact of foreign direct investment (FDI) on India’s economic growth and employment generation. FDI has been a crucial component of India’s economic strategy since the liberalization reforms of 1991. This paper explores how FDI contributes to GDP growth, sectoral employment distribution, and the broader economic landscape. The study also delves into the reasons for declining FDI inflows in recent years, comparing India’s performance with key Southeast Asian economies (Vietnam, Thailand, Malaysia, Indonesia, and the Philippines) from 2010 to 2020. Using panel data regression analysis, this paper quantifies th effects of GDP growth, trade openness, inflation, infrastructure quality, political stability, ease of doing business, and corporate taxation on FDI inflows. The findings suggest that while FDI significantly enhances GDP growth, its direct impact on employment varies across sectors, depending on labor intensity, investment policies, and industry competitiveness. The paper also investigates global capital flows and how shifts in geopolitical and macroeconomic conditions influence FDI redirection from India to Southeast Asia. Furthermore, the research evaluates India’s FDI policies in relation to global best practices and provides targeted policy recommendations to enhance India’s attractiveness as an investment destination. The findings from this paper contribute to an improved understanding of FDI dynamics and its role in shaping employment trends and economic progress in emerging markets like India.

Authors
P. Paramashivaiah, Senior Professor and Dean, Department of Studies and Research in Commerce, Tumkur University, Tumkur, Karnataka India.
Shreya Chakraborthy, Assistant Professor, Narsee Monjee Institute of Management Studies (NMIMS), Bengaluru. Karnataka India.
 

DOI: https://doi.org/10.32381/PROD.2025.66.03.10