SANEI: Completed Studies: Abstract

Health Policy Challenges in India: Some Lessons from the International Experience

This study attempts a comparative analysis of Foreign Direct Investment(FDI) in Chinese and Indian economic development. The stylised facts of such a comparison are well known. In volume, FDI in China exceeds that in India many-fold, not withstanding strong doubts about the reliability of Chinese official statistics in this area. In China significant inflow of FDI began at least a decade or so earlier than in India, due to the early origins of reforms dating back to 1979 in China as against 1992 in India.

The sources of FDI in the two countries have been very different. Chinese FDI is dominated by East Asian sources, particularly Hong Kong and Taiwan and mostly from expatriate Chinese population, whereas NRI investment in India has been abysmally low. The study finds that investments by large transnational corporations in both countries have been primarily oriented to the domestic market and to infrastructure development. Low wage costs have also been an added attraction for MNCs to investment in these two locations. However, in both, MNC investment responses have been delayed. In China, it has by now acquired substantial momentum but it is yet to take off in India.

Expatriate investment in China has essentially been a process of relocation of export oriented simple labour intensive manufactures from the neighbouring expatriate settlements into China. This process has been facilitated by China's low wages coupled with rapid growth of manufactured exports globally. However India's failure to tap NRI investments may be attributed to the risk averse nature of the Indian diaspora, lack of learning process in managing export oriented labour intensive manufacturing, and the lack of a decentralised sanctioning mechanism for FDI in India.

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