Analyzing the Causal Nexus between Agricultural Production and FDI in Agricultural Sector of India

Abstract

The inspiration behind this empirical study comes from the scant literature of FDI in agricultural sector. Agriculture considered being one of the prominent sectors of Indian Economy. During the times of pandemic, this is only sector that is resilient from crisis and shown 3.2% growth in terms of Gross Value Added. Henceforth it is imperative to understand the productivity of agricultural sector. FDI has been considered as the catalyst for the economy that provides technology, capital and demand. The paper studies the impact of FDI in agricultural sector of India. The causal nexus among FDI in agricultural sector and agricultural productivity has been studies and establishes the lead lag structure among them. The study has considered from 1991 to 2020 and applied wide variety of models ranging from Augmented Dickey Fuller Test, Ordinary Least Squares and Granger Causality. The results shown a unidirectional relationship and causality flows from FDI in agricultural sector to agricultural productivity. Finally, FDI in agricultural sector has been considered as a significant variable to predict agricultural productivity.