FDI Performance and Policy of India and China: A Comparative Analysis

The competition among countries to attract foreign direct investment (FDI) has increased significantly in the last two decades. While comparing FDI flows across countries, the comparison between India and China is a significant area of interest as these two countries enjoy strong similarities with each other in terms of population and market size and are also among the top prospective host economies for FDI inflows. However, they differ significantly in terms of their FDI performance. While China remains the largest host country in the developing world in terms of FDI inflows, India has been unable to attract comparable FDI inflows despite having a huge market. This paper analyses the aggregated as well as segregated trends in FDI inflows of both the countries and also presents a comparative analysis of the two countries in terms of their FDI policies and other macroeconomic factors. The analysis reveals that India needs further liberalization of its FDI policy and norms