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Nexus between Foreign Direct Investment and Manufacturing Output in India: An ARDL Approach

Pratap Kumar Jena*, Runu Lata Sahoo

The relationship between Foreign Direct Investment (FDI) and manufacturing output is being investigated by researchers at the international and national levels, and their findings are contradictory to each other. Although, some studies found a positive relationship between FDI and manufacturing output, and other studies found no relationship between these two variables. Some studies found the relationship but vary in the long-run and short run. Therefore, this paper has examined the nexus between FDI and Manufacturing Output Index (MFI) in India using the Auto Regressive Distributed Lag (ARDL) bounds test. The paper found the integration in both the long run and short run between FDI and MFI. Since the manufacturing sector is one of the important sectors in India for employment and economic growth, the government has to attract more FDI by providing certain facilities like; good environment for business investment, tax concessions, new investment opportunities in the manufacturing sector, etc.