ABSTRACT
Foreign direct investment (FDI) may enable the host countries to finance their developmental policies if such inflows complement the domestic investment and fuel economic growth, or it can play as a substitute by crowding out the domestic investment. However, a different genre of literature deals with the human capital formation effect of FDI in host countries. The positive relationship between FDI and human capital is observed generally for middle-income and upper-middle-income countries. According to a survey of global companies conducted by United Nations Conference on Trade and Development (UNCTAD), India remains the third most attractive destination for FDI for 2013-15, after China and the United States. Services, construction, communication, drugs and pharmaceuticals, chemicals, the automobile industry and so on are among the leading sectors which attract the major share of FDI inflows in the country. The World Input Output database (WIOD) industry-wise data is used for all the analysis except for FDI.
