Abstract
This study examines the effect of foreign direct investment (FDI) on economic growth in Bangladesh and India. The study also identifies the motivating factors and problems of FDI inflows in Bangladesh and India. We employ bivariate regression, ordinary least squares (OLS), and Granger causality estimation to examine the effect of FDI on GDP growth in Bangladesh and India using data for the period 1974-2014. The bivariate regression results find that FDI is positively correlated with GDP growth and have positive effect on economic growth for both countries. The regression results indicate that FDI is positively correlated to the economic growth of Bangladesh but it has not yet been established as a significant determining factor for the economic growth. On the other hand, the result indicates that FDI is negatively correlated to the economic growth in India and it has not yet been established as a significant determining factor for the economic growth. It cannot be said that FDI has a positive or negative impact on economic growth both the countries. We conclude that the effect of FDI on economic growth is ambiguous for both India and Bangladesh.
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