Role of Foreign Direct Investment in Indian Economy

Foreign direct investment (FDI) is a strategic component of investment needed by India or any country for achieving the economic reforms and maintains the pace of growth and development of the economy. As observed in past, FDI in India were low previously owing to the nation's not so encouraging regulatory policy frameworks but there had been changes in investment flows (FDI) from 2005 onwards due to the attractive new policy which had a broadened framework for investment in various sectors in India. Our aim is to point out the impact on various sectors of Indian Economy, which affect the economic scenario and also the level of predominance by the factors for economic contribution to India. FDI seen as an important catalyst for economic growth in the developing countries, it affects the economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfer in the host countries.

In past few decades, foreign investment has rapidly increased worldwide and has enhanced economic growth in developing countries. Many developing countries like India fear that by opening up markets to competition and foreign investment without restriction, they will lose control of their strategic industries and influence on national security, social stability & economic development.