The Impact of FDI Inflows on GDP Growth Rate and Unemployment Rate in India During 1991-2023

Abstract

The paper examined to relate the impact of FDI inflows in India on the unemployment rate and the economic growth as measured by GDP per capita during the study period from 1991 to 2023 using Johansen cointegration and vector error correction analysis. Moreover, the behaviour of India’s FDI inflows was studied by applying nonlinear trend, Hamilton’s decomposition model and tested ARIMA(p,d,q) model. The paper found that there is at least one cointegrating equation which tends to equilibrium insignificantly. The vector error correction showed that FDI inflows is positively related with GDP per capita and negatively related with unemployment rate. There is a short run relation between FDI and GDP per capita. There is no impulse response of FDI to unemployment rate and GDP per capita.