Introduction FDI is an investment made by a company or entity based in one country into a company or entity based in another company.

The investing company may make its overseas investment in a number of ways- either by setting up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company or through a merger or joint venture. Foreign investment (FDI) was introduced in 1991 under foreign exchange management act (FEMA), Driven by then finance minister Manmohan Singh. In 1991 LPG (liberalisation, privatization and globalisation) era was started in India. Even though the power at the centre has changed hands, the pace of the reforms has newer slackened till date. Before 1991, changes within the industrial sector in the country were modest to say the least. Most of the industrial sector was dominated by a select band of family- base of conglomerates that had been dominant historically. Post 1991, major restructuring has taken place with the emergence of more technogically advanced segments among industrial companies.

After independence from British colonial rule in 1947, India opted a socialist economy with government control over private sector participation, foreign trade and foreign direct investment. This economic policy aimed to substitute products which India imports with locally produced substitutes,

industrialisation, and state intervention in labour and financial markets, a large public sector, business regulation and centralised planning. Jawaharlal Nehru, who formulated and oversaw this economic policy, expected a favourable outcome from this strategy because it features both capitalist economy market and socialist command economy. But the outcome was unfavourable to the country and leads to liberalisation and privatization in India. Government made large investment in heavy industries and expects these industries will produce enough capital for investment in other sectors of the economy. But it didnt happen. In the other hand government has to invest more money for the survival of these companies because of poor management and low productivity. Indian average growth rate from 1950-1980 was 3.5 %. At the same time other Asian countries like Hong Kong, Singapore, South Korea, and Taiwan recorded an annual growth rate of 8%.

Trends of FDI in India Starting from a baseline of less than $ 1 billion dollar in 1990, 2012 UNCTAD (united nation conference on trade and development) survey projected India as the second most important FDI destination (after china) for transactional corporations during 200-2012 as per the date the sector that attract higher inflow were services, telecommunication, construction activities and computer software and hardware between year 2000-11, India attracted cumulative FDI inflow of $237 billion. 70% of this FDI constituted equity inflow, rest being reinvested earnings and other capital over the last decade, FDI in India grew at CAGR 23%. The Bull Run in India FDI started in financial year 2006-07 when it grew at 146% over the previous year. FDI peaked in year in financial year 2007-08 and only marginally declined in the following years of economic crisis. Total equity FDI inflow into India.