Capital inflow is considered to be welfare immiserizing, when the capital intensive import competing sector is tariffprotected and earnings of foreign capital are fully repatriated back to the foreign country. In such models, as the import competing sector expands it crowds out cheaper imports in the process. The present model incorporates features of monopolistic competition and increasing returns to scale and shows that capital inflow might lead to an unconditional rise in the import volume of the economy. This occurs as the price of the import competing brands becomes higher and thus consumers demand more of the internationally available cheaper importables.