Interstate Competition Policies and the Regional Convergence Hypothesis: A Framework of Analysis of Regional FDI Inflows

The present paper shows that regional FDI inflows (on the approval basis) conform to a regional divergence process where already rich states in terms of existing manufacturing bases (or gainers in terms of per capita income) are the gainers. This makes the interstate competition policy irrelevant in the sense that (1) incentives independent of growth centers do not play role in attracting FDI inflows; (2) incentives should form the part and parcel of regional policies that try to develop manufacturing bases in backward regions via growth centers.