Research on the effects of FDI inflows on GDP and employment in host economies has shown varied results, suggesting other factors play a moderating role. Despite their significance, institutional elements have yet to be explored. This chapter examines how institutions moderate FDI’s impact on GDP and employment, using China and India as case studies. The analysis employs three methodologies: an in-depth examination of institutional elements in both countries, confirmation of a positive correlation between FDI and GDP, and a negative correlation between FDI and the employment-to-population ratio (EPR), using World Bank data. The results highlight that institutional variations, particularly in governance, significantly influence FDI’s effects. Governance factors include state functionality, legal system efficiency, rule of law enforcement, and implementing FDI-supportive policies. The findings aim to enhance the positive impacts of FDI on GDP and employment. This research lays the groundwork for future studies on selective FDI policies, judicial controls, and FDI-favorable economic policies. The chapter’s novelty lies in its comprehensive investigation of institutional roles in FDI effects on GDP and employment, providing valuable insights for policymakers and researchers.