FOREIGN DIRECT INVESTMENT (FDI) AND ITS IMPACT ON INDIA

Abstract

Foreign Direct Investment (FDI) acquired an important role in the international economy after the Second World War. Theoretical studies on FDI have led to a better understanding of the economic mechanism and the behaviour of economic agents, both at micro and macro level allowing the opening of new area of study of economic theory. Foreign investments are the indispensable factors that help in boosting the growth of Indian economy. With the introduction of liberalisation policy under the finance ministry of Dr. Manmohan Singh in 1991 & with further few policy reforms, India has witnessed a change in the flow and direction of foreign direct investment (FDI) into the country. Long-term economic growth is a result of foreign direct investment (FDI). MNCs help domestic enterprises transfer technologies. In the businesses, there is organic growth or expansion. FDI is preferable to FII, sometimes known as hot money, which moves to the stock and bond markets and is very volatile. The stock market increases and draws more capital as a result of the strong growth in business due to FDI, which also helps enterprises by raising more money.