This comprehensive reference highlights the key differences between India and China in their policy framework and critically examines the far reaching impact of the Foreign Direct Investment (FDI) policy on trade, technology, and employment. Exploring the reasons for skewed regional distribution of FDI in both the countries, this report considers the nature, type, sources, and direction of inflows to India and China. Drawing conclusions based on concrete empirical evidence and supported by statistics, this study articulates the role of pragmatic policy, strong infrastructure, and a conducive operating environment in driving massive FDI flows into China and advocates a reorientation of policies relating to the development of infrastructure, labor laws, and state-approved investments in order to accelerate the pace of FDI inflows into India.