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Chasing the dragon: accounting for the under-performance of India by comparison with China in attracting foreign direct investment

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  • John S Henley

    (University of Edinburgh Management School, 50 George Square, Edinburgh EH8 9JY, Scotland, UK)

Abstract

This paper compares the performance of India and China in attracting foreign direct investment (FDI). China ranks number one as the world's preferred foreign investment destination. FDI statistics suggest that India's performance has been significantly understated but India still lags absolutely for several reasons. These include a high tariff regime, poor physical infrastructure, a regulatory system that is too often not business friendly and a policy of reservation of many potentially export-oriented sectors for small businesses. The paper concludes that further liberalization of India's FDI regime is likely to be driven by external pressures and state-level initiatives. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • John S Henley, 2004. "Chasing the dragon: accounting for the under-performance of India by comparison with China in attracting foreign direct investment," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(7), pages 1039-1052.
    • Handle: RePEc:wly:jintdv:v:16:y:2004:i:7:p:1039-1052
    DOI: 10.1002/jid.1153
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    References listed on IDEAS

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    1. Oecd, 2000. "Main Determinants and Impacts of Foreign Direct Investment on China's Economy," OECD Working Papers on International Investment 2000/4, OECD Publishing.
    2. Mr. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 2003/022, International Monetary Fund.
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    4. Lall, Somik V. & Jun Koo & Chakravorty, Sanjoy, 2003. "Diversity matters - the economic geography of industry location in India," Policy Research Working Paper Series 3072, The World Bank.
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    6. Albuquerque, Rui & Loayza, Norman & Serven, Luis, 2005. "World market integration through the lens of foreign direct investors," Journal of International Economics, Elsevier, vol. 66(2), pages 267-295, July.
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    Cited by:

    1. Mia Mikic & Witada Anukoonwattaka, 2011. "India: A New Player in Asian Production Networks?," Studies in Trade and Investment 75, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    2. Joyeeta Gupta & Harro van Asselt & Onno Kuik & Chris Evans, 2007. "Exogenous Promotion of Sustainable Electricity Policies in India: Opportunities and Challenges," Energy & Environment, , vol. 18(3-4), pages 403-420, July.
    3. Bhatt, P.R., 2013. "China’s Exports and Foreign Direct Investment," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 183-196.
    4. John Henley & Stefan Kratzsch & Mithat Külür & Tamer Tandogan, 2008. "Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon?," WIDER Working Paper Series RP2008-24, World Institute for Development Economic Research (UNU-WIDER).
    5. Witada Anukoonwattaka & Mia Mikic (ed.), 2011. "India: A New Player in Asian Production Networks?," ARTNeT Books and Research Reports, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), number brr9.

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