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o the policies and the agreement between the countries. Hence, it can be stated that impacts of FDI directly depends on the situations and circumstances that are being considered by the government.

By tightening of international financial conditions will have as awful effect on inflows of FDI. In the recent years, this has been main source of assets for many countries (U. N. Staff. 2009).FDI shows more effect on the economic growth of the countries as it provides various benefits to the countries that acquire FDI are illustrated below (Khan Arshad, 2007):

Introduces the latest techniques and technologies of marketing and management – with the help of FDI, the developing countries can know more about the latest techniques and the technologies that are being used by the developed countries. By acquiring and implementing these latest technologies in the developing countries, to some extent it can increase its growth in terms of economy.

Exploitation and utilization of local raw materials – usage of raw materials in the countries will be increased by exporting these excess materials to other countries and get benefited with them by importing other raw materials from other country which are shortage in their countries.

Can be easily access to the new technologies - as there will be a rapid flow between the countries, each of the country can know more easily about the other country and their religion. Based on this analysis, it can assess and access the technologies in their own region by making contract with the other countries.

Financial flows between the countries - Foreign inflows between the countries are used for financing current account deficits. The finance flows between the countries are transferred in the form of FDI where it doesn’t generate interests and repayment of principal but internally raises the human capital stock through job training.

Chapter – 3: Empirical Literature on FDI based on INDIA and CHINA

3.1. Effects of FDI on all other countries when compared with India and china

The existence of a strong negative relationship between trade share and country size was supported by the literature on trade and development. Country size and trade ratio are inversely proportional in size (larger the size of the country smaller is the trade ratio), the foreign trade, investment, and technology transfer between countries will directly affect the degree of sincerity and competitive pressures emanating from abroad (Pieter, B. 2007). Thus, the impact of these competitive pressures would be much less in a large country such as China and India than that among other East Asian NICs. In recent years china had recognized its need towards foreign trade, investment and technology with the aim of modernization, nothing like the Third World developing countries (India) that impoverished foreign capital.

1984-85

1994-95

1999-2000

2004-05

2006

2007

World

2.2

4.8

18.3

9.0

12.9

14.8

Developed economies

2.1

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