Abstract
This chapter seeks to focus on the role of foreign direct investment (FDI) in the economy since economic liberalization in 1991, and contends that the inflows of FDI so far in India have been disappointingly low. After considering a short historical perspective of India’s policy towards FDI, this chapter considers the structure and industrial breakdown of the inflows of FDI. An important element in the published discussion of the impact of FDI on the Indian economy is a comparison with China. China’s success in absorbing and utilizing FDI inflows in the post-reform period since 1978 has been contrasted with the corresponding failure of India: given its potential, India has attracted much less FDI than it should have attracted. While the Indian record can be explained in part as the outcome of certain mistaken policy prescriptions, it is amazing how a communist country such as China could free itself from its dogmatic barriers and attract FDI to such benefit.
I am grateful to Professor Edward Graham of the Institute for International Economics, Washington, DC, for his comments on an earlier version of this chapter.
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© 2005 International Economic Association
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Gupta, S. (2005). Multinationals and Foreign Direct Investment in India and China. In: Graham, E.M. (eds) Multinationals and Foreign Investment in Economic Development. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230522954_10
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DOI: https://doi.org/10.1057/9780230522954_10
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