FOREIGN DIRECT INVESTMENT AND ITS IMPORTANCE IN INDIA: NEW PERSPECTIVES

Foreign Direct Investment (FDI) has a very inherent role in the development of any nation especially for underdeveloped and developing countries. By virtue of the fact that these economies do not have the necessary level of reserves and income in order to meet the essential level of investment needed to sustain the growth of the economy. In such an economic scenario, foreign direct investment plays an vital role of bridging the gap between the accessible resources or funds and the requisite resources or funds. It not only leads to long-term growth of a country being a source of capital but also plays an important role for enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities. In India, FDI is considered as a developmental tool, which helps in achieving self-reliance in various sectors and in overall development of the economy. India after liberalizing and globalizing the economy to the outside world in 1991, there was a massive increase in the flow of foreign direct investment. This paper analyses FDI inflow into the country during the Post Liberalization period. The paper also attempts to put forth and analyze various set of factors which govern the flow of FDI proposing the causes for low inflow and suggestive remedial steps to increase the flow of FDI in India.