ABSTRACT
This chapter deals with the development of foreign investment in India and the nature of Non Resident Indian (NRI) investment after the 1991 reforms. The 1991 reforms set out to change the country's economic system by removing the hurdles for outside investment and by creating a new investor-friendly economic climate in the country. The chapter looks at the reasons for low NRI investment and investor problems in general. It describes why China has been more successful in attracting and using investment to build up its economy. Although China's combination of a dynamic market economy with a communist dictatorship seems an absurdity, the Chinese government in 1978 switched to a policy of gradually introducing market mechanisms and introducing foreign firms. The lack of a complicated bureaucratic system and a certain amount of transparency in economic policies are the main reasons behind China's success.
