In India, Foreign Direct Investment Analysis

Developing countries launched a wave of foreign investment Since the new century, the total foreign direct investment flows reached 379 billion U.S. dollars in 2006 which was with a growth of 21% comparing with 2005 and more than the highest record level in the history. The figure still amounted to 253 billion U.S. dollars in 2007 although there was a little decrease. Developing countries has become the main force to promote the development of the world's foreign direct investment. As the two biggest developing countries and also the fastest growing economies, China and India's foreign direct investment have been in the period of rapid growth recent years. From 2002 to 2007, China's non-financial foreign direct investment reached an average annual growth rate of 56 percent. India's external direct investment has reached 13.649 billion U.S. dollars in 2006, which had an increase of 4 times in 2 years. After the outbreak of financial crisis in the United States , China and India's foreign direct investment has soared contrarian trend. According to the preliminary statistics, China's foreign direct investment reached 52.15 billion U.S. dollars in 2008, and the total amount of foreign investment in India reached 48.21 billion U.S. dollars by the end of June 2008. Companies in the two countries are chasing up the opportunities in the world financial crisis, speeding up the process of internationalization strategy. But just as the differences between the economic development of the two countries, there were many differences in the foreign direct investment. Comparing the foreign direct investment between the two countries, we will find out that China's foreign direct investment has absolute advantages in the macro level, like the investment scale, economic effects of the investment. And corporations in India has more activity in the investment performance index, the main investment etc. at the micro level. Besides India has a very distinct advantage in the high-tech industry, which is China's weak links in foreign direct investment and the key of becoming a powerful country of foreign direct investment. Therefore, there is a need for us to completely study the system of the Indian foreign direct investment to learn from the advanced experience of India's foreign direct investment and to nurture multinational enterprises in our country, develop and consummate our country's foreign direct investment system.The paper is composed of a total of six chapters: the introduction, the main body of five chapters. The paper launched a specific line of thought as follows:Chapter I, Introduction. At the first introduces the background of the thesis and the research topics of significance, reviews the research literature in the theory of the foreign direct investment in both China and India and both at home and abroad. Explains the idea of writing this article and the research methods. Finally, describes the frame structure of the paper.Chapter II, Review of the theory of foreign direct investment. Theory is the summary and distillation of practice. We could study the practice of the foreign direct investment of China and India on the theoretical level to lay foundation of the empirical analysis and comparison of the foreign direct investment in China and India. Mainly refers the theory of the main small-scale technical theory of Prince and the technical place theory of Rao in India's foreign direct investment. Meanwhile refers Deng Xiaoping's foreign investment theory and China FDI research by many Chinese scholars in recent years in China's foreign direct investment theory.Chapter III, A Comparative Analysis of the characteristics in the foreign direct investment in China and India. Summarizes four main conclusions by doing comparative analysis between China and India in four aspects: characteristic of the scale of foreign direct investment, the characteristic of the main investment, the characteristic of the investment location features, the characteristic of industry.Chapter IV, A Comparative Analysis of the effect of the foreign direct investment in China and India. From the index of foreign direct investment performance in China and India to analysis competitiveness of foreign investment of enterprises in both countries. Sets up the regression analysis model of the economic growth and foreign direct investment in two countries to empirical analyze and compare the effect of FDI made to domestic economy in the two countries.Chapter V, A Comparative Analysis of the developing trend of the foreign direct investment in India and China. Makes the trend analysis of the net foreign direct investment according to the cycle theory of international investment development of Dunning. Compares the current stage of external direct investment in China and India from both theoretical and empirical aspects. In addition, analyze the development trend of FDI between two countries in the current world economic situation from two perspectives which are the financial crisis on the effect of domestic economy and the responses to the current financial crisis.Chapter VI, Conclusions and China's strategic choice. Two overall conclusions were made through the comparative analysis of the above summary, which were that at the micro level, Indian companies have more advantages especially in the investment motive, location and industry ,what should be the choice of drawing and thinking of China; at the macro level, China's foreign direct investment should be better than India ,China will enter a large-scale foreign direct investment era. Then making the recommendations and measures of putting forward China's future foreign direct investment ,which mainly include: China must vigorously develop the FDI service sector , promote the upgrading of the structure of FDI; encourage the development of private enterprises to invest overseas; the development of foreign investment to for advanced technology, integration of global resources, and optimize the structure of the fundamental motives of their own; the position of the government should play the supporting and service functions.