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The objective of this paper is to initiate discussions on standardizing the method for measuring Foreign Direct Investment (FDI) across countries. It is important to use consistent method so that there is a faithful representation of a country's investment climate and the information is relevant for the purpose of foreign investors. India and China measures Foreign Direct Investment (FDJ) using two different methods. India measures FDI on the basis of equity investments, whereas China includes certain items which do not strictly fall under the purview of FDI. Inclusion of items other than equity increases the reported FDI in China. It is presumed that overall higher reported FDI makes China appear more attractive than India. Our findings suggest that once adjustments for the definitionsare made, difference between the FDI in China and India decreases substantially.


Reprinted with permission from the publisher Delhi Institute of Advanced Studies.