The post-liberalization era has witnessed a significant increase in foreign direct investment (FDI) inflows and intra-industry trade (IIT) of India. Considering this fact, the article attempts to investigate a causal relationship between FDI and IIT in the manufacturing sector of India for the period 1992–2013. Causality across various industries of the manufacturing sector has also been analyzed. For the manufacturing sector, causality tests depict unidirectional causality from IIT to FDI. The results at industry level vary across different industries. For majority of the industries, it is found that FDI inflows have led to an increase in IIT for the manufacturing sector of India.
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