INTRODUCTION
Foreign direct investment plays a significant role in the development of any economy. It is one of the measures of growing economic globalization and acts as a link that fills the gap between investment and saving. The whole world is currently more global than it had ever been before. All the developing countries are easing up their policies to welcome investment from countries which are rich in capital resources. Huge firms in developed countries are now focusing on new markets to invest in. Countries like China and India, which have abundant labor available and a scope for products are favorable locations for FDI because they show the prospect of achieving high profits. Countries like United States are among the leading sources of FDI in India and China.
The creation of cross-national cooperation and agreements such as the European Union (EU), the Association of Southeast Asian Nations (ASEAN) and the North America Free Trade Area (NAFTA) have produced great changes in the conditions of international trade made with different world regions. Major foreign companies that served international markets using exports only have now diversified and have in turn replaced a part of exportation by having foreign production. Most firms, therefore view FDI and exports as substitutes for one another. FDI happens when a company in one country makes a direct investment of business interests such as creation and marketing of a product in another country (foreign country). A company/firm that undertakes FDI becomes a multinational enterprise (Hill, 2003).
PURPOSE
The purpose of this thesis is to examine FDI, show what value it adds to the economic growth of a country and interrelate these two terms therefore showing the impact of Foreign direct investment on the economic growth and employment of China and India and their differences. OBJECTIVES the paper works on the following objectives. To investigate the relationship between FDI and economic growth.
SIGNIFICANCE
The Study of FDI in a country is important because of the strong relationship it has with Economic growth. FDI helps to create financial stability in a country by boosting economic growth with the help of investments in different sectors.
The sectors which have resources but do not the required technology are able to acquire foreign technology collaboration. Because of the foreign capital host countries receive,FDI is able to provide access to advanced technology that can improve efficiency and productivity capacity in a particular sector of the industry, hence creating better production opportunities. It helps job creation and it is able to provide foreign expertise which is an important factor in improving existing technical processes in different countries and so much more.Hence it is considered as a tool that can be used for the growth and development of a country.
METHODOLOGY
The present study is exclusively based on secondary data which is collected from the Central Statistical Organization, and other sources like magazine and Government reports on Indian and Chinese economy.Data on FDI and GDP (Gross Domestic Product) was collected for the period of 10 years from 2008 to 2017. GDP is termed as an indicator of economic growth. GDP is taken as a dependent variable (the cause) and FDI as an independent variable (the effect). I chose to base my research on quantitive data that was collected through a deductive approach.Regression method is used to analyze the data collected.The theoretical framework was done using various books based on Foreign Direct investment, Economic growth and employment.
