This paper attempts to analyze the relationship between MNC’s and economic growth of the host country, within the framework of new growth policy. New growth theory gives the idea that the policies which embrace openness, competition, and innovation will promote growth. The study is exploratory is nature and information is collected from secondary sources. The focus of the paper lies on the transfer and diffusion of technology and know-how from foreign multinationals to their host countries and its impact on the host country growth. Spill over of technology and managerial skills from MNC’s to host country provide benefits in the form of advanced technology and enhanced skills of local people which in turn improve efficiency. The results show that MNC’s may play an important role for improving productivity and further increasing growth in their host countries.