Foreign direct investment: Trend analysis and its impact on gross domestic product

Foreign Direct Investment (FDI) is an investment made in other country on business interest by an individual or a company either by acquiring the business assets as ownership or having a strong control on the interest in a foreign country or establishing a business operation differently. India is one of the countries that have been getting benefits from FDI through different industries which add on to the value of overall development of the country one of the important economic indicators to measure the growth of an economy is Gross Domestic Product. This article tries to study the impact of FDI on the GDP and to also find the time required for FDI to have an impact on GDP. The data taken here are from 1996 to 2016 to find the impact of FDI on GDP by applying Granger causality test too find if there is casual relation between the two and VAR model is used to find how long FDI takes to have an impact on GDP. Data from 2001to 2016 is taken to see the growth rate of FDI in different sectors by using Compound Annual Growth Rate. The of the study show that, FDI has an impact on GDP and a gap of two years is required for FDI to have an impact on GDP.