Contribution of FDI in Service Employment of India

Abstract

In the globalized world, foreign direct investment (FDI) is seen as one of the best viable solutions for addressing the issue of insufficient funds in developing and less developed economies. Whether these economies follow the path of Balanced Growth or Unbalanced Growth; there always remains a crunch of domestic funds that can be mitigated through the availability of funds from foreign sources. In addition to the domestically generated funds, the Indian economy has relied on foreign funds and aid, for its growth and development needs from time to time and FDI has always remained an important component in this regard. While the review of the Indian growth pattern in the post-globalization era reveals that the service sector has evolved as the major income and employment contributory sector; this article tries to examine the dynamics of FDI inflow in the service sector and its contribution towards income and employment generation in this sector. Analyses of data from various sources such as CSO, NSSO, RBI and the World Bank reveal that the Indian service sector has continued to receive the highest share of FDI during 2004–2005 and 2019–20. Although, the contribution of FDI inflow towards income growth has been satisfactory; its contribution towards employment growth has been relatively lower.