Abstract:
Purpose: This study is performed with an objective to determine the impact of Foreign Direct
Investment on economic growth process in Pakistan's economy focusing on GDP growth rate to
understand the nature of relationship and future prospect and its ultimate impact on overall
economic picture in Pakistan.
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Research Methodology: In this study, interpretivism research philosophy is followed because in
this study we are interested to interpret the impact of Foreign Direct Investment, export and
inflation on economic growth in case of Pakistan while data collected in secondary in nature.
This study followed explanatory approach to explain the impact of FDI on economic growth in
case of Pakistan. Sample size designed is composed of 30 years from 1986 till 2015 employing
multivariate regression analysis to get the results using SPSS software.
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Findings of the Research: The results of current study revealed that there is a negative
relationship of annual change in volume of Foreign Direct Investment net of balance of payment
in current US dollar to economic growth of Pakistan focusing on GDP growth rate. There is
although not substantial influence of annual change in volume of Foreign Direct Investment net
of balance of payment in current US dollar on economic growth process of Pakistan but the value
of R square is 0.769 that explain weakly the influence hence based on findings alternative
hypothesis that there is negative and significant impact of FDI on GDP Growth Rate in
Pakistanis accepted while inflation shows that there is no significant relationship with economic
growth at 5 percent level of significance with significance value 0.581 and export shows that
there is significant relationship at 5 percent level of significance with significance value 0.009.
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Practical Implications: This research study helps to determine the importance of Foreign Direct
Investment in economic growth process and its long term implication on economic development
process.
