Why do governments try to attract more foreign investment?
Governments try to attract more foreign investment because MNCs bring money for additional investments, such as buying new machines for faster production. They also bring the latest technology for production, which benefits local companies.
Secondly, foreign investment leads to increased competition which improves the performance of domestic producers. They have to improve their quality to compete globally. Several top Indian companies have invested in newer technology and production methods, raised their production standards, and gained from successful collaborations with foreign companies.
Explanation
The textbook explains that foreign investment by MNCs benefits the host country in multiple ways: (1) MNCs provide money for additional investments and bring latest technology, (2) competition from foreign companies forces domestic producers to improve quality and production standards, and (3) local companies benefit from joint production and collaborations with foreign companies. These points directly answer why governments actively try to attract foreign investment.