V3I6P24

Impact of Foreign Direct Investment on the Export Performance of India’s Textile Sector: An Empirical Analysis

Kumudini Pradhan^1*, Dr. Jayashree Jethy²

Abstract

Foreign Direct Investment (FDI) is an important source of economic growth in developing countries. It helps industries grow by providing capital, technology and modern business practices. In India, the textile sector is one of the largest industries. It contributes significantly to manufacturing output, employment and export earnings. Due to its importance, the sector attracts foreign investment from different countries. This study examines the trends and growth of FDI inflows in India’s textile sector. It also analyses whether FDI has influenced the export performance of the sector or not. The study uses secondary data collected from the Department for Promotion of Industry and Internal Trade (DPIIT) and the Directorate General of Commercial Intelligence and Statistics (DGCI&S). The data cover the period from 2015-16 to 2024-25. Trend analysis, growth rate analysis, Pearson correlation and simple linear regression were used to analyse the data. The results show that FDI inflows into the textile sector fluctuated during the study period. The correlation analysis found a weak negative relationship between FDI and textile exports (r=-0.136) and the regression analysis revealed that FDI explained only 1.8 percent of the variation in textile exports. The regression model was also statistically insignificant (p=0.709). This indicates that FDI did not have a significant direct impact on textile export performance during the period studied. The study concludes that FDI does not support the development and modernisation of the textile sector through capital investment and technology transfer. However, export performance depends on many other factors. These include global market demand, trade policies and exchange rate fluctuations and production capacity. Therefore, FDI cannot be considered a major factor driving textile export growth in India.

Keywords:

Foreign Direct Investment (FDI), Textile Sector, Export Performance, India, International Trade