Foreign Direct Investment and Natural Resource Rent Are the Drivers of Shaping Economic Growth in South Asian Economies: A Panel Data Approach

Abstract

This study investigates the influence of FDI inflows and natural resource rents on the economic growth of selected South Asian countries, including Pakistan, Bangladesh, Nepal, India, Sri Lanka, and Iran. Using panel data from the World Development Indicators (WDI) covering the period from 1990 to 2022, various statistical tests were employed, such as the Unit Root Test, Co-integration Test, and Panel Causality Tests. The findings reveal that FDI inflows positively impact economic growth, while natural resource rents negatively correlate with growth. However, the results are statistically significant only in the fixed and random effects models. A key limitation of the study is the variability of outcomes across different methodologies (Fixed Effects, Random Effects, FMOLS, and DOLS), which may be influenced by data quality and underlying assumptions. Future research could expand the analysis to include data from other regions to enhance the generalizability of these findings.