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Abstract

Foreign direct investment (FDI) is an elemental component in international economic integration and generates direct, stable and long-lasting links among different economies. It plays an important role in the long-term development of a country not only as a source of capital but also for enhancing the competitiveness of the domestic economy through a transfer of technology, know-how between countries, strengthening infrastructure, raising productivity and generating new employment opportunities. It permits the host economy to promote its products more extensively in international markets. FDI is also a surplus source of funding for investment and under the right policy environment; it can be an important vehicle for business development. Several emerging countries like India, are facing the deficit of savings. This problem can be worked out through the help of foreign direct investment. Foreign investment helps in reducing the defect of the Balance of Payment (BOP). Foreign investment flows are increasing the scare domestic investments in developing nations, mainly in India. Many countries in the world may not be having appropriate infrastructure due to lack of funds, now better infrastructure facilities can be easily created if a country allows the foreign giant to invest. Foreign direct investment (FDI) as a strategic component of investment is needed by India to pull off the economic reforms and maintains the pace of growth and development of the economy. In India, FDI is considered as a developmental tool, which helps in achieving self-reliance in various sectors and in the overall development of the economy. This paper aims to identify the needs of FDI for India which require for the development of the Indian economy as well as determinants of FDI which affect Indian economy.