Dynamics of FDI Inflow on Indian Economy- A Brief Overview

Abstract

In this article, the focus is on investigating the influence of foreign direct investment (FDI) on the economic growth of India following the economic reforms of 1991. Additionally, the challenges that India has encountered in positioning itself as an attractive destination for FDI in the global market are also analyzed. The study also investigates the year-wise and sector-wise flow of FDI between 2001 and 2021 to observe the dynamic patterns of FDI inflow in the country. Furthermore, the paper provides key policy implications and highlights the complexities surrounding FDI in India India has become a popular destination for foreign investors due to its market potential and liberalized policy regime, despite being a latecomer in the FDI scene compared to other East Asian countries. Since the economic reform of 1991, FDI in India has experienced a positive growth rate, with the government continuously focusing on liberalizing policies towards FDI. FDI has been a significant driver for India's economic growth, enabling the country to achieve financial strength, stability, growth and development to sustain and compete in the global economy. The study indicates that FDI growth effects vary across sectors, with the services sector promoting growth in the manufacturing sector through cross-sector spillovers. FDI is indeed indispensable considered for India's economic growth and a positive association exists between FDI and GDP.