FOREIGN DIRECT INVESTMENT AND TECHNOLOGY SPILLOVER: EVIDENCE ACROSS INDIAN MANUFACTURING INDUSTRIES

Abstract

The paper attempts to analyze the spillover effect of Foreign Direct Investment (FDI) across Indian manufacturing industries. Foreign presence by way of FDI brings new channels of technology spillover to the domestic industrial firms in the form of enhanced efficiency and diffusion of knowledge in the long-run. By carrying out Pedroni cointegration tests, the analysis tries to provide a long-run relationship between endogenous variables and explanatory variables, pertaining to technology spillovers across Indian manufacturing industries. We find that technology spillovers are relatively higher in industries like food products, textiles, chemicals, drugs and pharmaceuticals and non-metallic mineral products.