Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of nondebt financial resource for the economic development of India. Foreign companies invest in India to take advantage of cheaper wages, special investment privileges like tax exemptions and others. For a country where foreign investments are being made, it also means achieving technical know-how and generation of employment. The continuous inflow of FDI in India, which is now allowed across several industries, clearly shows the faith that overseas investors have in the country's economy. The Indian government's policy regime and a robust business environment have ensured that foreign capital keep flowing into the country. The Government of India has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defen, Public Sector Units oil refineries, telecom, power exchanges and stock exchanges, among others. This research articles aims to examine the impact of FDI on the Indian economy and contribution of FDI in different sectors. The present study is not only confined to evaluate the impact of FDI on gross domestic product but also to analyse the trend of FDI in India. The study has focused on the trends of FDI flow in India during 2000–2001 to 2014–2015 (up to June, 2015). It is mainly based on secondary source of information, and the relevant secondary data have been collected from various publications of Government of India, Reserve Bank of India, UNACTD's World Investment Report (2015) published by United Nations different journals, FDI fact sheets and others. During the liberalised era, India has attracted huge quantum of funds in the form of FDI; while the performance of FDI has been impressive and satisfactory, on several other fronts, it has been inadequate also.