Relation Between Inflow Of FDI and The Development Of India's Economy

Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or companyin another country, either by buying a company in the target country or by expanding operations of an existing business in that country.Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such asstocks and bonds. Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by thenfinance minister Manmohan Singh. As Singh subsequently became the prime minister, this has been one of his top political problems,even in the current times. India disallowed overseas corporate bodies (OCB) to invest in India.Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the second most important FDIdestination (after China) for transnational corporations during 2010–2012. As per the data, the sectors that attracted higher inflowswere services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, US and UK wereamong the leading sources of FDI. Based on UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the first half of the lastyear. The focus of the research is to find out the relationship between inflows of FDI with the development of India's economy(measured in terms of GDP). Further the paper aims to find out the impact of economic reforms on FDI in India. The study alsoexamines the constraints in increasing the level of FDI in India.