Economic liberalization or market reforms have become the buzz word in economics
all over the world in the recent years. Among various aspects of economic liberalization,
foreign capital, particularly inflow of foreign direct investment (FDI) has been viewed
as a main engine for economic development in the world economy. Thus this paper
attempts to analyze the impact of FDI inflows on the performance of various Indian
industries. Using Panel Co-integration tests namely Pedroni Residual Co-integration,
Kao Residual Co-integration test and Johanson Fisher panel co-intergration tests, the
presence of co-integration between FDI inflows and the performance variables of
selected industries have been tested. The results of the paper reveals that there is a long
run relationship between industry performance indicators and FDI only in case of
services, telecom, computer software and hardware, real estate and automobile
industries and in case of majority of other industries, there is no long run relationship
between industry performance indicators and FDI inflow.