FDI flows into India have grown rapidly since the liberalisation of the policy regime in the early nineties. Nevertheless they remain small when measured as a proportion of GDP or total investment. In other words they play a very small role in the development of our economy. This contrasts with the very important role that FDI has played in the economic development of other fast growing Asian economies such as ASEAN and China. What one may call the “FDI-Export” model has powered the high growth rates of Singapore, Thailand, Malaysia, Indonesia and China during the past two or three decades. The reasons for the very low rate of FDI in India compared to these countries is because of both external and internal reasons. Earlier papers by ICRIER staff have pointed to some of these reasons. The current paper identifies the caus
