Foreign Direct Investment and Foreign Trade in India: Toda-Yamamoto Causality Evidence from Selected Trade Partners

The article is a modest attempt to empirically examine the short-run causal nexus between Foreign Direct Investment (FDI) and foreign trade in India with selected trade partners using the Toda-Yamamoto non-Granger Causality approach. This analysis provides mixed results. With the selected trade partners the result observes a short-run causal nexus from export to FDI and FDI to import in India. In brief, the study finds that most of the FDI inflows in India are directed towards domestic marketoriented with the motive of market-seeking in nature.