Trend of FDI in India and Its Impact on Economic Growth

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. This paper has made an attempt to analyse the trend of FDI flow into the country and to find the relation between FDI, FII and GDP of the country. India has witnessed the increase in the flow of FDI from US $ 4029 million in 2001-01, to US$ 36396 million on 2013. Furthermore India has witnessed a year-on-year (y-o-y) growth of 24.2 per cent in FDI to touch US$ 3.95 billion in April-May 2013 as against US$ 3.18 billion during the same period in 2012. However, the analysis shows that the country is still far behind in comparison to some of the developing countries like China. The continuous upsurge in foreign direct investments (FDI), allowed across the industries and sectors, has proven that foreign investors have faith in the resilience of Indian markets. Furthermore, the study indicates that flow of FDI and GDP are positively correlated with each other and the countrys GDP is showing a positive movement with flow of Foreign Direct Investment in India. The flow of FII and FDI also shows the positive correlation with each other.