Foreign Investment: India



It is often argued that free trade is better than restricted trade, which in turn is better than no trade at all. This argument may not always apply to the FDI made by MNCs in the respective host countries. Sometimes, the interests of the MNCs are in conflict with those of the host country. An MNC is primarily interested in global profit maximization, which may not necessarily lead to greater investment and employment generation in the host country. Nevertheless, there is room for bargaining to bring about Pareto-improvement, which can be evidenced by gradual removal of restrictions on foreign investment in developing countries by the respective governments, to attract FDI.


Host Country Foreign Investment Foreign Firm Domestic Firm Export Performance 
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© Arindam Banik and Pradip K. Bhaumik 2006

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