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FDI: India vs China


Code : ITF0008

Year :

Industry : General Business

Region : :India China

Teaching Note: Available

Structured Assignment : Not Available

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Introduction: India and China, the world’s two biggest nations and the fastest growing amongst the emerging economies of theworld, have a number of similarities ranging fromhuge population to western domination during colonial days and socialist legacy in policies in the 1950s and the 1960s. However, the two countries have many differences. India’s per capita income was $440 per year against China’s $990. In 1978 India’s per capita was $196.8while China’s per capitawas $225.1 (Exhibit I).While in China, 3%of the population lived belowpoverty line, in India it was 30-40%.1 China received a Foreign Direct Investment (FDI) of $52.7 billion in 2002, where as in India the figure was $4.67 billion.2 Since the opening up of the economy in 1978, China has enjoyed a steady flowof FDI (Exhibit II). China got around 40% of the total FDI that was flowing into the developing countries and became the second largest recipient of FDI in the world, next only to the US.3 Cumulative FDI in China in the reform period exceeded US$400 billion at the start of 2003, and the country accounted for around 20%of the global FDI in the developing countries,4much higher than the cumulative FDI into India during the last decade.

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