Dept. of Commerce and Management Studtes, Dr. B.H. Ambedkar Untverstty, Srtkakulam, Andhra Pradesh.
Foreign direct investment (FDI) is major catalyst for development and the integration of developing countries in the global economy. The positive developmental role of FDI in general is well documented. FDI produc~s a positive effect on economic growth in host countries. One convincing argument for that is that FDI consists of a package of capital, technology management, and market access. FDI tends to be directed at those manufacturing sectors and key infrastructures that enjoy actual and potential comparative advantage. While the local economic environment determines the overall degree of investment confidence in a country, inflows of FDI could reinforce the confidence, contributing to the creation of avirtuous cycle that affects not only local and foreign investment but also foreign trade and production. This phenomenon well matches the direction of historical flowsof FDI in the Asian and Pacific region. Initially, FDI had surged into the newly industrialized economies (NIEs) and thereafter moved to ASEAN countries. Recently, it has been changing its direction to People's Republic of China (PRC), India and Viet Nam. This changing stream of FDI flows suggests that the degree of confidence building, in flows of FDI, and the pace of economic growth seem to have a positive interrelation in the Asian and Pacific region especially in India.
