Role of FDI and FII in economic growth of India

Foreign Direct Investment (FDI) plays a very important role in the development of the nation. It is very much vital in case of underdeveloped and developing countries. A typical characteristic of these developing and underdeveloped economies is the fact that these economies do not have the needed level of savings and income in order to meet the required level of investment needed to sustain the growth of the economy. In such cases, FDI plays an important role in bridging the gap between available resources or funds and the required resources or funds. In India, FDI is considered as a developmental tool, which helps in achieving self-reliance in various sectors and in overall development of the economy. Many developing countries in India are facing the deficit of savings. This problem can be achieved with the help of FDI/FII. Foreign Investment helps in reducing the BOP. The flow of foreign investment serving as a catalyst for the growth of economy in India. The present study is based on the objectives like (a) to know the requirement of the amount of foreign investment, by India, for its economic development and (b) to analyze the trend and role of FDI and FII in improving the quality and availability of goods. To analyze these objectives, data has been gathered from Reports of Govt. and RBI relating to foreign investment. This paper also depicts the various set of factors which influence the flow of FDI identifying the causes for low inflow and suggestive remedial measures to increase the flow of FDI in India with that of other developing nations in the world. Further this paper recommends that we should welcome the inflow of foreign investment because it enables us to achieve our cherished goals like balance of payment, rapid economic development, removal of poverty, and also it is very much convenient and favorable for Indian economy.