Impact of Foreign Direct Investment in Indian Economic Development

Abstract

Foreign direct investment (FDI) is always shows good impact in the growth of Indian economy and Foreign Direct Investment is the wonderful weapon device in the hands of Government of India. Foreign Direct Investment (FDI) plays vital role in an Indian economy. The new economic policy of liberalization, privatization and globalization pointed out in 1991 induced the policy of foreign direct investment. Hence the foreign direct investment is an inevitable one in our economy. FDI plays a multifaceted role in the overall development of any economy. FDI is often preferred over Foreign Institutional Investments (FII) as it considered to be the most beneficial form of foreign investment in an economy. FDI plays a multifaceted role in the complete development of any economy. It provides a new source for capital, can lead to technological up gradation, skill enhancement and allocate efficiency effects. While FDI is forecast to create clear impact on the economy, it has also contributed in certain adverse impact on Indian economy during the past few years. The present study is organized to study the correlation and investigate the impact of FDI on Indian economy. The flow of FDI for the past 15 years was taken for study (2003-2018). The consequences were studied by testing the correlation with the country’s GDP and Stock Market Indices. Sensex and Nifty were calculated as the authenticated representative of Indian Stock Market. The study concludes that flow of FDI into the country plays a dominant role in deciding the stock market movements