Abstract
During the past three decades, numerous policy changes were made by the policy makers to attract foreign direct investment (FDI) in India. An extensive body of studies using rich firm level panel data have analyzed how foreign firms presence affect the productivity/technology spillovers to domestic firms in India. These studies using recent methodological advancements distinguish between horizontal and vertical spillovers. Empirical analyses of productivity/technology spillovers from foreign firms offer inconclusive results with early studies reporting neutral and negative FDI spillovers, while more recent studies consistently providing evidence of positive vertical spillovers. Therefore, the main contribution of this paper is to review the literature on FDI spillovers in India and explore whether there are any policy lessons from the findings of these firm level studies.
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