<p>Great question! I know it gets little confusing.</p>

<p>Let's take an example of US and India. I am in the US. India's interest rate (return on investment) is 10%. The US has 8%. Then, I will invest in India -- more ROI. Hence, high-interest rate means more foreign investment.</p>

<p>However, my brother in India wanted to build a building there. Since the interest rate is high, taking loans is more expensive, and hence he will decide not to invest -- not to make that building. So, because of high-interest rate, domestic investment decreases.  </p>

CC BY-SA 4.0
2018-06-04T00:26:38.147Z
2018-06-04T00:26:38.147Z
Vraj Shroff
<p>I read that increased interest rate attracts foreign investment but discourages domestic investment.</p>

<p>Why does interest rate have different effects on foreign and domestic investments?</p>

<interest-rate><investment>
Interest Rate and Foreign / Domestic Investment
user18483
# Interest Rate and Foreign / Domestic Investment

(Asked by: username_0 on 2018-06-03)

I read that increased interest rate attracts foreign investment but discourages domestic investment.

Why does interest rate have different effects on foreign and domestic investments?

**Tags:** interest-rate, investment

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## 1 answers

### Answer by username_1 on 2018-06-04. Score: 1

Great question! I know it gets little confusing.

Let's take an example of US and India. I am in the US. India's interest rate (return on investment) is 10%. The US has 8%. Then, I will invest in India -- more ROI. Hence, high-interest rate means more foreign investment.

However, my brother in India wanted to build a building there. Since the interest rate is high, taking loans is more expensive, and hence he will decide not to invest -- not to make that building. So, because of high-interest rate, domestic investment decreases.


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