Title: Foreign direct investment and regional economic development

Authors: S. Mahalakshmi; S. Thiyagarajan; G. Naresh

Addresses: Department of Humanities and Social Sciences, NIT Silchar, India ' Department of International Business, School of Management, Pondicherry University, Pondicherry, India ' Department of Accounting and Finance, Charlton College of Business, University of Massachusetts, Dartmouth, USA

Abstract: Foreign direct investment is assumed to be one of the important conditions paving way for improving the competitiveness and managerial skills of the economy which in turn increases production, exports, employment and wages. Therefore, an attempt has been made to determine the contribution of FDI inflows on the development of Indian states. The effect of FDI inflows on state development indicators have been identified by applying panel fixed effects model based on the assumption that the intercept as well as slope coefficients vary over individual cross sections/states. The results states that FDI inflow has not significantly contributed in increasing the economic development of most of the Indian states except few. It could be mainly because large volume of FDI inflows are in the form of brown field investment and moreover, it has been attracted by very few major states which possess better infrastructure and potential human resource.

Keywords: FDI policy; FDI inflows; regional development; economic development; panel fixed effects model; employment generation; foreign direct investment; India; brownfield investment.

DOI: 10.1504/IJBEX.2017.081432

International Journal of Business Excellence, 2017 Vol.11 No.2, pp.199 - 220

Received: 10 Apr 2015
Accepted: 02 Jun 2015
Published online: 08 Jan 2017 *

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