In the recent economic climate the link between technology transfers and foreign direct investment seems to be essential for multinationals. The main objective of multinational companies is to maximize their profits. This requires them to produce goods and services at the lowest possible cost (fixed and variable) by exploiting developing country resources outside their home country (Pool and Stamos 1990). The channels of international technology transfer and their importance for growth were studied extensively in the 1990s. The study identifies three main channels of international technological spillovers. The first is the direct transfer of technology through international licensing agreements (Eaton and Kortum 1996), on the contrary this source is considered less important since the most valuable technologies are not available under license (World Investment Report 2000). The second concerns foreign direct investment from developed countries to developing countries since it is considered the cheapest and most reliable technique as a spillover effect (Blomström and Kokko 1997). The third is technology transfer through international trade in which imports and exports of intermediate goods and capital products are exchanged (Markusen 1989, Clerides, Lach, and Tybout 1997). On the other hand, it has been seen that multinationals do not encourage spillovers due to (a) transmission of technology to their subsidiaries abroad. (b) Technologies that do not support the host country environment. (c) Maintain control over technology by reducing spillovers and encouraging imports. (d) Maintain advanced technology compared to developing countries through intellectual property rights (Aitken and Harrison et al. 1999). Being an emerging economy, India has a huge presence of multinationals... half of the paper......2 pp.42-56. India is not Mexico: an interview with Manmohan Singh. Forbes (1995). pp.160-161.Karp, J. (1996). Food for politics: McDonald's opens in India's thorny market. Far East Economic Review. pp.72.Kulkarni, V.G. (1993). The bulge of the middle class. Far East Economic Review. pp.44-46.Markusen, JR (1989) Trade in producer services and other specialized intermediate inputs. American Economic Review. 79 pp.85-95.Mitra, P. (1998). Free yourself. Far East Economic Review. pp.30.Pool, J.C., & Stamos, S. (1990). International economics: theory, policy and practice. United States: Lexington Books, pp.255-270. Saywell, T. (1997). Good hunting ground. Far Eastern Economic Journal, pp.57Schuman, M. (1995). Power hungry. Forbes. pp.162.World Investment Report (2000) Cross-Border Mergers, Acquisitions and Development: UNCTAD.