Impact of Foreign Direct Investment on Indian Economy

Abstract

Foreign direct investment (FDI) is the important catalysts for economic growth in developing countries. The association between Foreign Direct Investment (FDI) and economic growth is a subject of great interest in the field of international development. In the scenario of volatile flows of global capital, the stability of FDI emerges as an effective channel to faster growth in developing countries, particularly in relation to Least Developed Countries.

Foreign Direct Investment (FDI) as a strategic component of investment is needed by India for achieving the economic reforms and maintains the pace of growth and development of the economy. The paces of FDI inflows in India initially were low due to regulatory policy framework but there is a sharp rise in investment flows from 2005 towards because of the new policy has broadened. The study tries to find out how FDI seen as an important economic catalyst of Indian economic growth by stimulating domestic investment, increasing human capital formation and by facilitating the technology transfers. The main purpose of the study is to investigate the impact of FDI on economic growth in India.