Does Corruption in a Country Affect the Foreign Direct Investment? A Study of Rising Economic Super Powers China and India

Abstract

Many researchers have studied the effect of corruption on Foreign Direct Investment (FDI) and majority of them have come to the conclusion that higher levels corruption in a country deter FDI. This paper is a case-based comparative study of the effect of corruption on FDI in China and India. Corruption in India has negatively affected FDI, whereas that is not true in China. This study finds that while corruption does affect FDI inflows into a country, the effect also depends on nature of corruption and not only on size of corruption.