Economics Dissertation Impact of FDI on Domestic Competition and Industrial Growth in Emerging Economies India. The increasing inflow of Foreign Direct Investment (FDI) over the years to emerging economies is seen with great optimism by governments and policy makers since it is expected to uplift the economic position of the host countries through positive spill-overs. Various studies have examined the impact of FDI on the domestic firms, economic growth and productivity of the host economy, highlighting the positive externalities that make this investment a worthwhile option to explore. However, the fact that this investment may sometimes negatively affect the output of the host economy or the behaviour of domestic firms is not thoroughly explored, especially with respect to developing economies where FDI may cause domestic firms to exit or prevent the establishment of small and medium enterprises.
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