Causality between Foreign Portfolio Inflows and Economic Growth : Evidence from China and India

The objective of this paper is to examine the causal relationship of foreign portfolio inflows and economic growth for two Asian economies, i.e. China and India. We have used Granger causality test for both countries' data ranging from 2001 to 2013 and concur with the findings of Durham (2003) and Duasa and Kassim (2009), i.e. there is no direct causality between foreign portfolio inflows and economic growth. Our results also suggest an indirect relationship between foreign portfolio inflows and economic growth of China and India