FDI and Reform

It is often said that if India were to shed its inhibitions about foreign direct investment and follow in the footsteps of China, we would be in a position to realise our full potential. This misses out the true significance of the Chinese experience. China's FDI saga has been a textbook replay of what institutional economists would call "adaptive efficiency" on the part of its political regime. The country made courageous but careful choices in difficult circumstances, signalling radical departures from the belief system it had been accustomed to for decades.