FOREIGN DIRECT INVESTMENT (FDI) AND ECONOMIC DEVELOPMENT: COMPARATIVE ANALYSIS OF SOUTH ASIAN ECONOMIES

This research examines the effect of foreign direct investment (FDI) on economic growth by following the South Asian countries from 2006 to 2022 and using a large panel dataset and strong econometric methods. The inquiry begins with the use of a method called Feasible Generalized Least Squares (FGLS). To ensure its reliability, it employs the Fix Effects with Driscoll-Kraay standard errors, Two-Stage Least Squares (2SLS), and the Common Correlated Effects Mean Group (CCEMG) estimator. There is little to no correlation between economic growth and the human capital index (HCI), trade openness (TO), or inflation (I). Conversely, there is a strong positive correlation between economic progress and FDI and GCF respectively. Given the inverse relationship between growth and government spending (GS), it would seem that taxpayer dollars are going unused. According to the findings of the study, increasing absorption capacity may be accomplished by performing activities such as investing in education, enhancing the quality of institutions, and facilitating commerce. Several policy recommendations have been made, including the following: to encourage public-private partnerships in technical and vocational education; to improve the investment climate through the use of digital platforms and infrastructure upgrades; to promote regional integration through the implementation of standardized investment regulations and cross-border special economic zones; and to promote regional integration. This information may be used by policymakers in South Asian countries in order to provide direction for their attempts to entice foreign direct investment (FDI) for the purpose of fostering long-term economic development.