Trends and Patterns of FDI in India and China: A Comparative Study

Most of the present day underdeveloped countries of the world have set out a planned programme for accelerating the pace of their economic development. In a country planning for industrialization and aiming to achieve a target rate of growth, there is a need for resources. The resources can be mobilized through domestic as well as foreign sources. So far as, the domestic sources are concerned, they may not be sufficient to acquire the fixed rate of growth. Generally domestic savings are less than the required amount of investment. Also the very process of industrialization calls for import of capital goods which cannot be locally produced. Hence comes the need for foreign sources. They not only supplement the domestic savings but also provide the recipient country with extra foreign exchange to buy imports essential for filling the saving investment gap and foreign exchange gap. FDI implies that the investor exerts a significant degree of influence on the management of the enterprise resident in the other economy. Such investment involves both the initial transaction between the two entities and all subsequent transaction between them among foreign affiliates, both incorporated and un-incorporated. Individuals as well as business entities may undertake FDI. Flows of FDI comprise capital provided (either directly or through other related enterprises) by a Foreign Direct Investor to an FDI enterprise, or capital received from an FDI enterprise by a foreign direct investor. FDI has three components, viz., equity capital, reinvested earnings and intra-company loans.