<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The attempt of this paper is to find an empirical relationship between Foreign Direct Investment and New Firms (Paid up Capital) and Gross Capital Formation (proxy for business growth) and Credit to Commercial Sector and Gross Capital Formation using the test of stationarity (ADF, PP, and KPSS methods), Johansen Cointegration and Granger’s Causality. The results show that FDI crowds out creation of new firms and capital formation and it is the Credit flow to the commercial sector that causes Gross Capital Formation at current price. It shows domestic flow of credit is more influential in capital formation rather than foreign capital inflow.</p>
</abstract>

The attempt of this paper is to find an empirical relationship between Foreign Direct Investment and New Firms (Paid up Capital) and Gross Capital Formation (proxy for business growth) and Credit to Commercial Sector and Gross Capital Formation using the test of stationarity (ADF, PP, and KPSS methods), Johansen Cointegration and Granger’s Causality. The results show that FDI crowds out creation of new firms and capital formation and it is the Credit flow to the commercial sector that causes Gross Capital Formation at current price. It shows domestic flow of credit is more influential in capital formation rather than foreign capital inflow.

Domestic capital vs. foreign capital new enterprise creation: the case of FDI in India

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The attempt of this paper is to find an empirical relationship between Foreign Direct Investment and New Firms (Paid up Capital) and Gross Capital Formation...

Domestic capital vs. foreign capital new enterprise creation: the case of FDI in India

Published Online: Jan 02, 2024

Page range: 9 - 24

Received: Jul 23, 2023

Accepted: Sep 14, 2023

DOI: https://doi.org/10.2478/fiqf-2023-0024

Keywords
Foreign Direct Investment, Gross Capital Formation, Commercial Sector, Savings-Investment Gap, Paid-Up Capital

© 2023 Tulasidharan Sajikumar et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Domestic capital vs. foreign capital new enterprise creation: the case of FDI in India

Published Online: Jan 02, 2024

Page range: 9 - 24

Received: Jul 23, 2023

Accepted: Sep 14, 2023

DOI: https://doi.org/10.2478/fiqf-2023-0024

KeywordsForeign Direct Investment, Gross Capital Formation, Commercial Sector, Savings-Investment Gap, Paid-Up Capital

© 2023 Tulasidharan Sajikumar et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Foreign Direct Investment, Gross Capital Formation, Commercial Sector, Savings-Investment Gap, Paid-Up Capital