Economic reforms implemented since 1978 have contributed to economic growth and prosperity in China. China has emerged as the largest host country for foreign direct investment, in that it receives enormous inflows and has concurrently become one of the largest suppliers of outward foreign direct investment projects. The institutional background of China’s investment and economic policies provides an understanding of the influence of foreign direct investment on economic development. Well-designed policies can attract more FDI inflows and contribute to greater outbound investment.

This study uses historic flow of funds data in India and examines the movements of funds across financial and non-financial sectors of the economy. The study develops a new theoretical framework to map the multidimensional nexus across macro-economic aggregates and to integrate the NIP and FOF accounts. The financial system has witnessed discernible deepening - increased preferences of households for financial assets - and widening -availability of a wide spectrum of financial services and instruments with varying degrees of returns, risks and liquidity. The household sector is the only surplus sector in the domestic economy and it uses its financial saving surplus to finance the resource deficits of the private corporate business and government sectors. The banking sector played a dominant role in the allocation of resources in India as compared to other financial institutions.

This study examines the economic growth and domestic saving in India. The onset of gradual economic reforms since the 1980s provided some fillip to growth, and the momentum was carried forward through the adoption of a wide-ranging structural adjustment program since the beginning 1990s. The sustainability of an accelerated growth trajectory hinges heavily on the acceleration of saving and investment and the improvements in productivity. While foreign direct investment, liberalization of trade and the globalisation of goods and financial markets have well-documented gains, the accrual of these gains is contingent on the acceleration of productivity to a threshold level where the firms can effectively compete for market share in both domestic and international markets. Gobalization is unlikely to take developing economies out of low level equilibrium traps of underdevelopment, if it is not accompanied by the institutional reforms, development of adequate infrastructure, unleashing of productivities, development of efficient financial sector, and the improvements in the competitiveness of import-competing industries in the domestic and export-oriented industries in the international markets.