International Migration and Inward FDI of India: A Substitute or Complement Analysis

Abstract

This study examined the substitute or complement relationship between Indian bilateral emigration and inward FDI stock. This research contributes to the existing literature on the earlier association between bilateral emigration and inward FDI stock by using India as a reporting country and 88 partner countries from 2001 to 2020. The empirical estimation of this study employed benchmark panel regression, such as fixed effects and random effects. This study also minimizes the gap in econometric modeling using the Poisson pseudo-maximum likelihood approach with a panel dataset considering host and source countries with 1760 panel pairs for the selected sample time. This study has found that bilateral inward FDI into India from 88 partner countries positively correlates with the Indian bilateral emigration stock to the 88 partner countries. This result implies a complementary relationship between Indian bilateral emigration and inward FDI stock. Furthermore, this study confirms that the migration and FDI networks and the interaction term of migration and FDI networks significantly and positively influence Indian bilateral emigration stock. Moreover, our study confirms that no non-linear relationship exists between bilateral emigration and inward FDI stock in India. As a result, effective policies that harness these interactions can improve the economic benefits for India and contribute to its long-term prosperity.