FDI, Urbanization, and Economic Growth Linkages in India and China

Abstract

The rapid urbanization and economic growth during new round of globalization is largely due to the flows of Foreign Direct Investment (FDI). In this context the objectives of this chapter is to analyze the causality and linkage among urbanization, GDP and foreign direct investment in China and India with the help of secondary data from 1979 to 2012. It focuses on determinants and pattern of FDI flow in China and India. The study observes a significant positive correlation between urbanization and flow of FDI to a particular region both in China and India. The rate of growth of FDI is significantly influenced by rate of growth of urban population at 10 per cent level of significance and by rate of growth of per capita GDP at 1 percent level of significance. The study also highlights the causality and linkage between urbanization and FDI inflow with evidences from China and India.