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.
Finance 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.
The average annual level of FDI inflow for developing Asia had raced sharply from US$ 19 billion during 1984 - 1985 to US$ 500 billion till 2007, at the same time share to developing countries have raised from 15.1 to 17.4 percent which is shown in the above table. The gross domestic fixed capital (GDFCF) as a share of FDI inflow is higher for all the developing countries in the period 1984 - 1996 and reversal due to the Asian financial crisis during 1997 - 98. FDI inflow for developing Asia with the average FDI/GDFCF ratio during entire period 1984 - 2007 is approximately 9 percent and 7.1 per cent when compared with all the developing countries at the same time the global average is 7.4 per cent. China is the recipient country of inward flow and the largest developing country from past two decades where it has been investigated a theoretical increase in inflow with in developing Asia. Among all the countries china was in the second position for total FDI flow as per the ASEAN countries, with increased average annual level of US$ 3 billion during 2000-2007, and from the year 1980 to 1997 almost before six years china was in the second half with US$ 30 billion which was the onset effect of financial crises from 1997-98, due to decline and with determination from about US$ 35 billion per annum before the year 1997 to an annual average of about US$ 24 billion between 1997-79. Establishment of export-oriented industries is heavily concentrated by china's FDI, there observation on the share of FIEs for total exports in transition economies of china is two percent of expended persistently before 1980 and approximately 60 percent by the year 2006. India process to increases FDI participation in export- oriented activities which had remained at a outlier region of FDI whose one/third FDI during the independence in 1947 was a major amount of stock as a primary sector with plantation, mining and oil at the same time one/forth was the manufacturing and all the remaining stocks are in services, mostly trade, construction, transportation and utilities. The inflow started increasing in manufacturing from 1960s although with a divestment from this sector of FDI, since, low-wages, low skilled manpower are the India's huge supply it can attract garments and other simple assembly activities which would indirectly favor the heavy foreign investment industry thus primarily focusing towards domestic market. From mid 1990s a slight increase in software is observed as well as significant competition with the world market at industrial production was not notable (Park, J. H. 2002).some of the difficulties which are to be faced and over come for fast development of the country . India faced many difficulties to attract foreign investors in both products and services market now it is only success to service industry of IT mainly. In order to overcome these difficulties to stimulate domestic demand this is given in three steps:
