IMPACT OF FOREIGN DIRECT INVESTMENT (FDI) ON ECONOMIC GROWTH OF PAKISTAN (SECTORIAL ANALYSIS)

Abstract

This study demonstrates the direct relationship between Foreign Direct Investment (FDI) and the economic growth of Pakistan, focusing on the effects of uneven distribution. The agricultural sector has struggled to enhance FDI because of insufficient investment initiatives, slow technology adoption, and resistance to political and administrative changes. The technology-driven sector attracted the most foreign direct investments, aiming to enhance labor productivity, while other industries fail to maximize their potential. Because of regulatory limitations and external disruptions, the service sector has similarly not consistently gained from FDI. Significant  acroeconomic factors like inflation, capital formation, and exchange market activity play a key role in determining the utility of an investment, with inflation being the most destabilizing. The study highlighted the necessity of liberal pro-business policies and political
stability in the nation to attract FDI. Engaging with China and India clearly illustrates how structured policy strategies, incentives, and infrastructure investments create an avenue for FDI. The findings urge Pakistan to embrace extensive policy reforms focused on modern technology, regulatory adjustments, and investment- friendly measures.