Research On The Determinants Of Economic Growth Is A Common

Ajami and BarNiv (1984) attempted to explain the variability of FDI across countries. They emphasized in following determinants of FDI in US: relative size of the US market, change in exports to the US, growth of GNP in the home and host countries, decline in value of the US dollar during the late 1970s, inflation rates in the home and host countries, attractiveness of the US capital markets and research and development and manufacturing as a percent of GNP.

They FDI also increase the amount of investment and consumption goods within a country. This sets the pace for development since most of these goods that multinational corporations produce are usually for export purposes. Increased export performance also helps in mobilization of the labor and accumulation of capital within the host country4. This greatly improves the trading position of the country in question by improving its Balance of Trade statement. Increased exports not only increase the productivity of a country but also provide a country with foreign exchange which in turn increases imported capital to assist in the development of a country4.

The effects can be negative or positive. According to the theory of Hill (2003), FDI can affect host countries on resources-transfer effects, employment, competition and product and process innovation. There are a small number of research available that explain the behaviour of local companies when FDI take place. Nevertheless, there are many research that explain the benefits for the local economy. Foreign direct investment can increased indirect productivity for host country companies through the realization of external economies. Generally these benefits indicates the importance of the way in which the influence is transmitted that referred as “spillovers” (BlomstrOrn,

This can be measured by the following formula; Per capita nominal GDP = Nominal GDP / Population, Per capita real GDP = Real GDP / Population. Seven factors determine economic growth. Natural resources such as land, mineral deposits, waterways; climatic conditions provide an essential foundation to economic growth. Combined with the other resources of capital, labor and enterprises, natural resources can be developed and organized to increase the productive capacity if the nation. Consequently the quality and size of the labor force is a major determinant of economic growth. Education and vocational training are essential the growth potential of a nation. The promotion of education and job training schemes increase the knowledge, skills and flexibility of the workforce that contributes to potentially higher levels of productivity and efficiency. Whether from natural increase or immigration population growth can cause a higher level of economic growth. An increasing population requires increased public spending on housing, education and other social needs while businesses expectations of

There is no doubt that foreign direct investment (FDI) can do a lot of good for a country, for instance it can add to an economy’s productive capacity and import not just capital but technology, production skills and better management. Multinational Corporation (MNC) is a large corporation which produces or sells goods or services in various countries. MNCs often seek out developing countries in order to set up a branch of their corporation in that host country and they do this to seek out several benefits. One benefit is that the MNC can bring their product to a new market that may not have previously had it. Another reason to produce goods in a country that is not its home country is primarily because; in developing countries the MNC can

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can, therefore, grow more efficiently and can more easily become competitive economic participants. For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. These raise employment levels, and, theoretically, lead to a growth in the gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.

Economic growth is an economic term to describe an increase in a country’s national earnings of wealth, or the growth of Gross Domestic Product (GDP) (Swanenberg,2005). The measurement of economic growth is possible that the change in national income in comparison to the numbers held by the year before. In the world today, economic growth is one of the ways to determine how successful is the country’s economic activity (Swanenberg, 2005). This is explained by the fact that economic growth reflects the standard of living of one country’s people, and how effective is the use of the economy’s resources. According to Riley (2015), economic growth is a long-term expansion of productive potential, and a short term will be shown at the annual % of change in real national output.

The objective of this paper is to analyze the effectiveness of foreign aid flows to certain sectors in attracting FDI. This is done from both a theoretical and an empirical point of view, starting from the broad focus of comparing physical capital and complementary factors of production and then narrowing the focus to economic and social aid. The main

The world is becoming a global village from the rapid introduction of technology; there should be a need to understand the relationship between foreign investors and the economy. Foreign investors and its impact on the economic growth of a country cannot be over emphasized. A way by which it affects the economy is through the foreign direct investment. Foreign direct investment is defined not only as the transfer of money, but also a mixture of financial and intangible assets such as technology, managerial capability, marketing skills, and other assets (Nahide & Badri, 2014). In various economies they have regulations guiding the actions of foreign investors, but their impact are still felt on the economy, especially the developing countries. It assists in creating employment opportunities as well as improving the Gross Domestic Product (GDP) of the economy. Recently, there has been an increased attention to foreign direct investment; this proves the fact that it’s seen as the main factor of economic growth (Camelia, 2013). Despite the barrier to foreign investment, it has a positive impact on the economic growth of a country.

Analyse the main exogenous (FDI) and endogenous (entrepreneurship) policy prescriptions used in economic development policy and identify areas (and potential policies) through which these may be used together to improve economic performance.

Yousaf (2008) Analyses of more than 3 decades reveal that FDI has positive relation with imports in short & long-run where as relationship with exports is negative in short & positive in the long-run. FDI is an economic influencer of economy of a country specially developing countries experience accelerated GDP when successful in attracting FDI as in case of Pakistan.

Economists believe that Foreign Direct Investments is an essential part of economic evolution in every country. There are many academic papers that attempt to assess FDI aspects. Despite many researchers have tried to give an accurate explanation to FDI, there is no comprehensively approved theory. FDI motivations have been mainly researched by John Dunning, Stephen Hymer, Raymond Vernon, etc.

As per the conducted research, the FDI will enable the under developing nations to grow faster. In the year 2011, the inflow of FDI in India has been able to reach the level of $11.1billion, which is also considerable as a drastic change in the economic activities. FDI inflow and Globalisation has influenced the average GDP rate of countries and the same influenced gradually.

In Indian context, the importance of FDI was realized way back in 1948 when emphasis was given on creating domestic base. However, since access to finance was quite limited, the attitude towards FDI was receptive (Kumar, 2004). Since then there was a debate over the necessity of FDI and Government of India in the 1980s cautiously went on deregulation of industries. However, after the adoption of liberal investment policy under economic reforms in 1991 resulted in attraction of more FDI inflow to the country. In recent times, FDI inflow to India increased by 17.1 percent in 2005, which is 5.8 percent of GDP of the country.

The FDI & FII mantra is considered an all-purpose panacea for the ills of the Indian economy and society. It has become routine for our finance ministers to "showcase" India in various international forums and exhort the global captains of industry and commerce to come to India. We here want to know about the far-reaching implications of FDI in our economy and, particularly, how it can stifle economic growth.