Trends and Dimensions of FDI in South Asian Economies — A Comparative Analysis

Abstract

This paper compares the trends and dimensions of FDI in major South Asian economies, namely Bangladesh, India, Pakistan, Sri Lanka and Nepal. The paper reveals that although South Asia, as a whole, received higher importance in receiving FDI after the post reform period (1990s), India holds lion’s share of FDI in this region. Besides, the equity component has been the largest form of FDI in South Asia, although the share of re-invested earnings in FDI inflows of Bangladesh and Pakistan exceeds than that of India. Likewise, South Asian economies differ substantially on an individual basis when sectoral decomposition of FDI and major source economies are taken into account. The paper highlights that poor FDI utilization efficiency, political risk in investment and cost of doing business are some of the key factors for promoting difference in the South Asian economies in receiving FDI.