Effectiveness of the policies are disregarded: All policies are not equally effective in attracting the investors.
Cost of incentive competition: The incentives being given by the states in the race to attract high FDI involve a cost. Thus it is wrong to assume that the states can achieve high growth by offering incentives. These costs are of different nature. Firstly, it puts pressure on the states' exchequer. Secondly, sometimes the competition turns out to unhealthy meaning to say intensive competition among the states make them losers by benefitting the foreign entrepreneurs. Thus to look into these kinds of costs is very important. It is also good to look into the opportunity cost of offering incentives. In other words instead of offering incentives the states can invest the same amount of money in improving the quality of human resource, governance, etc., which also brings in FDI. Thus a cost-benefit analysis could be a meaningful exercise.
As it is clear from the empirical part the incentives have increased the already existing regional imbalance from 0.42 to 0.67 for the manufacturing sector and from 0.64 to 0.66 for the service sector. It is seen that incentives are flowing to the regions where there was already enough investment. Thus the state governments while framing their policies to attract private investment should keep in their mind that the incentives are sufficient condition not a necessary condition to attract private investment. Thus the governments should give attention towards improving governance, security, human resource development, etc., which are necessary to attract investment before offering incentives. Thus incentives have to be accompanied by these necessary conditions if the state has to attract private investment.(责任编辑：BUG)