Abstract

Foreign direct investment has increasingly become an integral of economic growth in most developing economies, upon accepting the liberal market economic paradigm. Given this backdrop, the paper is geared at underpinning the impact of foreign direct investment on economic growth in developing economy, with particular reference to Pakistan. The paper considers a timeline of (2001 to 2010) in measuring the extent to which foreign direct investment spurs economic growth in the country. Similarly, we seek to ascertain whether there was an economic growth or decline amid a diminishing trend of FDI, though our paper suggests there is insignificant impact on the economy, as the latter faces a falling trend of FDI. The empirical results of the paper reveal a weak positive correlation of FDI with economic growth. The paper has gathered data from the State Bank of Pakistan, Ministry of Finance and Economic Surveys of Pakistan. Hence, the paper intends to provide guidance to investors as well as furnish policymakers in crafting out policies tailored at attracting foreign investors.

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