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<p>This study investigates the interdependencies among Foreign Direct Investment (FDI), personal remittances, and economic growth in India during 1997–2024. Prior research has typically examined FDI and remittance driven growth independently, often neglecting their joint dynamics amidst significant economic reforms and global shocks. Addressing this gap, the present study employs econometric techniques including Johansen cointegration, the Vector Error Correction Model (VECM), Structural Vector Autoregression (SVAR), and Granger causality tests to explore both short-term and long-term relationships among FDI, remittances, and Real Gross Domestic Product (RGDP). The empirical results confirm one cointegrating relationship, indicating a strong long-run equilibrium among the variables. The VECM results reveal that FDI explains about 91% of long-run variations in GDP, establishing it as the dominant driver of economic growth through capital accumulation and productivity enhancement, while remittances account for nearly 77%, serving as a short-term stabilizer against economic volatility. SVAR analysis shows that FDI shocks have persistent positive effects on GDP, whereas remittance shocks are immediate but transitory. Granger causality tests confirm unidirectional causality from FDI and remittances to GDP, highlighting their complementary yet asymmetric roles. Overall, the study provides crucial policy insights emphasizing the need to leverage foreign investment and remittance inflows for inclusive, resilient, and sustainable economic growth in India’s evolving macroeconomic landscape.</p>

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Dynamic interlinkages among FDI, remittances, and economic growth in India

  • 期刊论文

  • 发表日期：

    2025年12月15日

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  • Satyendra Kushwaha,
  • Rajkishan S. Nair

摘要

This study investigates the interdependencies among Foreign Direct Investment (FDI), personal remittances, and economic growth in India during 1997–2024. Prior research has typically examined FDI and remittance driven growth independently, often neglecting their joint dynamics amidst significant economic reforms and global shocks. Addressing this gap, the present study employs econometric techniques including Johansen cointegration, the Vector Error Correction Model (VECM), Structural Vector Autoregression (SVAR), and Granger causality tests to explore both short-term and long-term relationships among FDI, remittances, and Real Gross Domestic Product (RGDP). The empirical results confirm one cointegrating relationship, indicating a strong long-run equilibrium among the variables. The VECM results reveal that FDI explains about 91% of long-run variations in GDP, establishing it as the dominant driver of economic growth through capital accumulation and productivity enhancement, while remittances account for nearly 77%, serving as a short-term stabilizer against economic volatility. SVAR analysis shows that FDI shocks have persistent positive effects on GDP, whereas remittance shocks are immediate but transitory. Granger causality tests confirm unidirectional causality from FDI and remittances to GDP, highlighting their complementary yet asymmetric roles. Overall, the study provides crucial policy insights emphasizing the need to leverage foreign investment and remittance inflows for inclusive, resilient, and sustainable economic growth in India’s evolving macroeconomic landscape.