| Pub. Date | : Jan, 2024 |
|---|---|
| Product Name | : The IUP Journal of Applied Economics |
| Product Type | : Article |
| Product Code | : IJAE030124 |
| Author Name | : Parul Singh and Pradeep Kumar Singh |
| Availability | : YES |
| Subject/Domain | : Economics |
| Download Format | : PDF Format |
| No. of Pages | : 19 |
The study examines the role of foreign direct investment (FDI) in shaping the export trajectory of the Indian automobile sector. The study uses VECM technique to determine the existence of cointegration between FDI inflows and exports of automobile industry, and to check the long-run and short-run dynamism among the variables. It uses annual time series data on exports and FDI inflows in the industry by considering Indian rupee real effective exchange rate (REER) and world GDP as control variables. The study finds that FDI inflows positively and significantly affect the exports of automobile industry in India in the long run. The findings also validate the J-curve theory of effect of depreciation on the exports of automobile industry that depreciation of Indian rupee has a favorable effect on the exports or trade balance of this industry. The study finds a significant relationship between FDI inflows and exports in only one direction, i.e., running from FDI inflows to exports of the industry. Furthermore, the results show that there is bidirectional causality between India's rupee REER and FDI inflows in automobile industry. The results suggest that providing a conducive environment to foreign players would positively impact the exports of the automobile industry.
The global automotive landscape has undergone transformative changes over the past few decades, with emerging economies becoming key players in the production and export of automobiles. Among these nations, India has emerged as a significant player, witnessing remarkable growth in its automotive sector. Central to this growth has been the influx of foreign direct investment (FDI), which has not only fueled the expansion of the Indian automobile industry but has also played a pivotal role in shaping its export dynamics. This paper aims to delve into the intricate relationship between FDI and the export performance of the automobile industry in India.