Role of Foreign Direct Investment by Multinational Companies in Economic Growth of Nepal

Abstract

This paper explains the effect of foreign direct investment on economic growth of Nepal. It examines the impact of the total number of industries and the total number of positions approved for foreign investment on the gross domestic product (GDP) per capita and the real GDP growth rate of Nepal. The paper uses data from fiscal year 2004/05 to fiscal year 2013/14. The analysis shows the positive impact of foreign investment on real GDP growth rate but insignificant impact on GDP per capita of Nepal. This paper reaches the conclusion that the host country should take full advantage of foreign investment to boost the economic growth of the nation. The host country should distribute foreign investment to industries by category (construction, manufacturing, energy, services, tourism, and agriculture) and at different scales (small, medium, and large).