Foreign Direct Investment (FDI) has contributed in a big way in improving export competitiveness and volume of exports particularly technology intensive manufacturing exports in China and Singapore. India has also made earnest efforts in recent years to sell itself as an attractive destination for FDI not only to acquire advanced technology but also to enhance its export potential and export competitiveness with emphasis on technology intensive exports.

The note highlights the fact that by emulating the policies followed by China and Singapore and also with the right mix of domestic policies for FDI by the government, India can substantially enhance its export competitiveness in the international market. Further, the cointegration and causality analysis with an Error Correction Model (ECM) reveals that there exists a bi-directional causality indicating a positive relationship between FDI and manufacturing exports, in both long- run as well as in short-run, in India.

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