Role of foreign direct investment and foreign institutional investment in Indian economy

Foreign Investment plays a very important role in the long-term development of a country not only as a source of capital but also for enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities. The role of the role of foreign institutional investment and foreign direct investment in the economic development of a country has received considerable attention in India since independence and of late it is a topic of discussion among economists and development planners. The Indian government differentiates cross-border capital inflows into various categories like foreign direct investment (FDI), foreign institutional investment (FII), non-resident Indian (NRI) and person of Indian origin (PIO) investment. Inflow of investment from other countries is encouraged since it complements domestic investments in capital-scarce economies of developing countries, India opened up to investments from abroad gradually over the past two decades, especially since the landmark economic liberalisation of 1991. FDI and FII are equally connected to investment in a foreign country. Foreign direct investment (FDI) refers to the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor where the FII or Foreign Institutional Investor is an investment prepared by an investor in the markets of a foreign country. Therefore an attempt has been made in this paper Know the impact of foreign direct investments and foreign institutional investment on the real economic growth in India over a period 2001–02 to 2012–13.