Nepal, a tiny country sandwiched between two giant economies, India and China, has been going through a political and economic setback in recent times. Nonetheless, Nepal has adopted the policy of attracting Foreign Direct Investment (FDI), which has shown some positive results. This paper discusses the points that make FDI more attractive for foreign firms, applying those points to the Nepalese economy and finding out the role played by FDIs in the economic development of Nepal. The paper observes that increased FDI has not been very significant in the growth of Nepalese GDP in absolute as well as in the relative sense. The authors also try to find out the reasons behind this non-existent relationship between FDI and GDP. The paper is divided into four sections. After the introductory remarks in the first few pages, Section 2 summarizes the points that firms consider most important for FDI determination, Section 3 uses the data and tables of the Nepalese economy to unsuccessfully find the relationship between FDI and GDP of Nepal, and Section 4 brings out the summary and conclusion. The paper also makes some suggestions for policy changes that can attract FDI in future.

Nepal is a landlocked country situated between two large, rapidly developing countries, India and China. Nepal sports a variety of climates, ranging from subarctic to tropical, as well as vast rivers and the world's tallest mountain, Mount Everest. Nepal's primary religion is Hinduism, and it is also home to Lumbini, the birthplace of Buddha (12). Nepal is run under constitutional monarchy, with an elected government that is frequently found corrupt and removed from office. The country is in civil war with the maoistscommunists who want drastic constitutional changes. Some of them have resorted to violence in recent years.

This paper discusses the advantages of Foreign Direct Investment (FDI) in general for both firms as well as developing countries. Advantages for firms include conditions of superior technology, avoiding tariffs, large economies of scale, the need for low-skill labor, and the scope to be the first to introduce a good to the foreign market. Advantages for developing countries include the introduction of new capital, technology, entrepreneurship, and higher financial capital into the economies.

FDI , GDP, paper, four sections, introductory, most important, FDI determination, data and tables, Nepalese economy,foreign market, technology, entrepreneurship, Foreign Direct Investment (FDI), low-skill labor, financial capital.