Role Of Fdi In The Economic Development Of Nepal

Nepal, a tiny country sandwiched between two giant economies, India and China, has been going through a political and economic setback in recent times. Nonetheless, Nepal has adopted the policy of attracting Foreign Direct Investment (FDI), which has shown some positive results. This paper discusses the points that make FDI more attractive for foreign firms, applying those points to the Nepalese economy and finding out the role played by FDIs in the economic development of Nepal. The paper observes that increased FDI has not been very significant in the growth of Nepalese GDP in absolute as well as in the relative sense. The authors also try to find out the reasons behind this non-existent relationship between FDI and GDP. The paper is divided into four sections. After the introductory remarks in the first few pages, Section 2 summarizes the points that firms consider most important for FDI determination, Section 3 uses the data and tables of the Nepalese economy to unsuccessfully find the relationship between FDI and GDP of Nepal, and Section 4 brings out the summary and conclusion. The paper also makes some suggestions for policy changes that can attract FDI in future.