Does Economic Growth Promote Foreign Direct Investment?Evidence from India and Malaysia

The paper explores the promotion of Foreign Direct Investment (FDI) towards economic growth (and vice versa) in the economy. The empirical investigation has been undertaken in two Asian countries namely India and Malaysia during the period from 1970 to 2004. The empirical analysis confirmed that it is economic growth that promotes FDI in both the Indian and Malaysian economy. On the contrary, FDI does not promote economic growth in these two countries. The paper justifies the possible reasons for the same and strongly argues that FDI promotes economic growth indirectly via productivity spillovers and exports pillovers effect. In the end, the paper also suggests few possible areas for the promotion of FDI towards economic growth and vice versa.