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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. Harm Zebregs & Wanda S Tseng, 2002. "Foreign Direct Investment in China; Some Lessons for Other Countries," IMF Policy Discussion Papers 02/3, International Monetary Fund.
    2. 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.
    3. 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.
    4. Anuradha Dayal-Gulati & Aasim M. Husain, 2000. "Centripetal forces in China's Economic Take-Off," IMF Working Papers 00/86, International Monetary Fund.
    5. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
    6. Shatz, Howard J. & Venables, Anthony J., 2000. "The geography of international investment," Policy Research Working Paper Series 2338, The World Bank.
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    Cited by:

    1. Henley, John & Kratzsch, Stefan & Kulur, Mithat & Tandogan, Tamer, 2008. "Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon?," WIDER Working Paper Series 024, World Institute for Development Economic Research (UNU-WIDER).

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