Foreign Direct Investments in India and China: A Comparative Study

Abstract

The main object of this paper is to study the changing structure and direction of Foreign Direct Investment of India and China comparatively. It is well known that FDI can complement local development efforts in a number of ways, including boosting export competitiveness; generating employment and strengthening the skills base; enhancing technological capabilities and increasing financial resources for development. Global Foreign Direct Investment (FDI) inflows rose modestly by 5 percent, to reach $1.24 trillion in 2010. While global industrial output and world trade are already back to their pre-crisis levels, FDI flows in 2010 remained some 15 percent below their pre-crisis average, and nearly 37 percent below their 2007 peak. UNCTAD predicts FDI flows will continue their recovery to reach $1.4-1.6 trillion, or the pre-crisis level, in 2011. They are expected to rise further to $1.7 trillion in 2012 and reach $1.9 trillion in 2013, the peak achieved in 2007.The service sector has attracted highest (21 percent) FDI inflows; then computer software, and hardware (9 percent), telecommunication sector (8 percent) and Housing and Real estate (7 percent) during 2008 to August 2010. Mauritius (42 percent to total inflows of FDI) has been largest investor in India, followed by Singapore (9 percent) during 2008 to August 2010 among top ten countries. China’s highest FDI inflows in leasing and business service 30280.70 million USD in 2010. Second sector is Banking (8627.39) followed by wholesale and retail trade, mining, transport, storage and post etc. during the same period.In short, comparatively the global FDI inflow in China is highest than India in 2010. The sector wise FDI inflow show that, a highest FDI inflow to India is in housing and real estate. But China’s FDI inflow is Business service and Banking in study period.