FDI and its Relation with Exports in India, Status and Prospect in North East Region

After pursuing an inward looking policy of import substitution with public regulation in charge for more than four decades, India has adopted the New Economic Policy (NEP) in 1991 in the wake of economic crisis. The NEP has removed all sorts of biases against exports initiating reforms in the areas of international trade, investment, financial sector, and industrial and public sector deregulations. The flows of foreign capital are being welcomed. The East Asian experience has shown that the export-led growth strategies have been facilitated by FDI transferring into the host country technology, managerial and other expertise needed to exploit the country's comparative advantage. Against this back-drop, this study has three fold objectives. First, it investigates the trends of FDI in India during the period 1991-92--- 2010-11. Second, based on the yearly time series data, the relationship between FDI & manufactured exports has been examined for the same period by using the vector error correction model (VECM).The study found bi-directional causality between FDI and Exports. Finally, the paper depicts the present status of FDI & exports in North East Region (NER) with a focus on their prospect. The Look East Policy (LEP) of the govt. may benefit the region because of its strategic location. However, despite having natural advantage of trade with neighbouring countries and the potentiality to develop various industries as being endowed with vast natural resources, the NER fails to attract any sizeable amount of FDI due to infrastructural and other bottlenecks. The need is to remove such fundamental constraints through strategic intervention