Impact of Foreign Direct Investment on Indian Economy

In Indian economy, Foreign Direct Investment has generated a lot of euphoria. Foreign direct investment (FDI) has been one of the defining features of the world economic system during the final two decades. The purpose of this paper is to provide an overview of the impact of foreign direct investment in Indian economy. Since 1991, after the introduction of LPG the flow of foreign direct investment (FDI) rapidly spread out across India; this increase was induced by an increase in mergers and acquisitions activities. This trend is gaining force, as Indian Government started to ask a question: "What is the impact of FDIs in our country's enduring economic growth?" Whereas the traditional and the purchasing power theory had it that "FDI could become the engine of growth for India through the transfer and diffusion of knowledge", there is now an increasing need to assess this claim by finding out the growth trend of FDI in India. This research report proposes to study the impact of FDI on the Indian economy, especially after two decades of economic reforms, and breaks down the challenges to position itself favorably in the worldwide competition for FDI.