FDI AND ITS IMPACT ON DEVELOPING ECONOMY

Abstract

A country’s economic growth depends on the policies adapted by its government to facilitate investment, mainly
in economic and industrial sector. FDI has become a key to national development strategies for almost all the countries in
the world. FDI is defined as investment made to acquire lasting interest in enterprise operating outside the country of the
investor.
FDI has played its role in rapid economic growth of Southeast Asian countries. India has embarked on ambitious plan to
emulate the success of her neighbors to east and is trying to sell herself as a safe and profitable destination for FDI. As a
result the Indian government over the years has brought many drastic changes in the rules and regulations to improve the
climate for foreign investment in India. The FDI inflow are becoming more and more vital for accelerating the desired
degree of growth and development of different industrial sectors. The FDI equity inflows in March 2016 went up by 16.5 per
cent to $2.46 billion, according to data released by the Department of Industrial Policy and Promotion (DIPP). Of the FDI
inflows (equity) in FY'16, services sector (including financial, banking, insurance, non-financial / business, outsourcing,
R&D, courier, technology testing and analysis) attracted maximum investments of $6.88 billion followed by computer
hardware and software ($5.90 billion), trading business ($3.84 billion) and automobile industry ($2.52 billion).
The paper studied the level of FDI in different sectors of Indian economy, its growth rate and its relevance with economic
growth.