Over the last two decades, the policy stance of governments in emerging markets like India and China clearly demonstrates that FDI is one of the most sought-after instruments as a driver for economic growth through technology transfers, employment generation, improved access to managerial expertise, global capital and product markets, and marketing and distribution networks. Despite their adherence to different political systems, China and India are aggressively pursuing economic liberalization for growth. However, their strategic paths for economic development are remarkably different. In the growth models pursued by them, China relies heavily on manufacturing exports as a key anchor for sustainable acceleration in growth and integration, whereas India's growth is driven more by the services sector. In this paper, the author compares the two models and concludes that India's growth pattern is more skewed as it has been well-proved that the growth of the IT sector does not have strong linkages to the remainder of the Indian economy. China's model, on the other hand, has been successful primarily because of the strong linkages it has developed with all the sectors of economy, including agriculture, services and manufacturing. The study also finds that as regards institutional framework, India is better placed in terms of a world-class capital market and a robust banking system.

The rise of China and India is one of the most important economic phenomena in the world today. Together, they account for 40 percent of the global population of working age and on the basis of purchasing power parity (PPP) 18 percent of the global economy. For two decades, their economies have been growing twice as fast as the rest of the world. According to the present trends, in another two decades their share in the global economy will match their proportion of the global population. Indeed, in a decade, China's and India's economy should, in terms of PPP, surpass that of the US and Japan, respectively. China is marching ahead with over 10 percent gross domestic product (GDP) growth rate over the last two decades by following the conventional path of transiting from an agricultural economy to a robust industrial economy—an evolution observed in many developed countries, including the US, Japan, South Korea and Taiwan, and in the process, building vital linkages among its agricultural, industrial and services sectors, and systematically encouraging domestic consumption concomittant with a sharp focus on exports.

In contrast, India is attempting to leap from a predominantly agricultural economy to a knowledge-based service economy. This approach is highlighted as the "shining" beacon of a 21^st century economic development model. Bureaucrats and business leaders cite India's 6 percent GDP growth over the last decade and the strong growth of India's software and IT-enabled services sector (ITES) in support of the `leapfrog' approach. However, the fact is that the lack of vital linkages of ITES with the remainder of the Indian economy is ignored. Linkages with other economic sectors are essential since they exert a ripple or multiplier effect and create large number of jobs for the entire spectrum of workforce. The ITES sector employs mainly the educated, urban youth, leaving a large part of the India's population further behind.

Management Research Journal, Foreign Direct Investment, FDI, Political Systems, Informatiom Technology, IT, IT-Enabled Services Sector, ITES, Gross Domestic Product, GDP, Global Economy, Indian Economy, Purchasing Power Parity , PPP, Multinational Corporations, MNCs, Financial Services Sectors, Indian Services Sector, Strategic Information Technology Services, SITS, Business Processes Outsourcing, BPO.