An Analytical Study on Foreign Direct Investment and Service Sector in India

Abstract

Nowadays, due to the global recession, most of the countries have not been able to raise capital. One of the economic aspects of globalization is increasing investments in the form of Foreign Direct Investments (FDI). They are in search of financial support in order to achieve stability in the economy. India is also looking forward for FDI in order to move in a direction to become a developed economy. India has been able to attract better FDI than other developed countries even during the crisis period and now FDI in India has been showing a positive growth rate. Since 1991 the government has focused on liberalization of policies to welcome FDI as it has been a key driver for accelerating the economic growth through technology transfer, employment generation, and improved access to management expertise, global capital, product markets and distribution network. FDI in India has enabled to achieve a certain degree of financial stability; growth and development to sustain and compete in the global economy. The Services sector has been very crucial for India as their contributions towards GDP growth, services, export growth and openness of the economy is vulnerable. Service sector contributes over 60 per cent to India's GDP. On this backdrop, an attempt is made to analyze FDI and service sector in India and its impact on the growth of the economy. It also focuses on the determinants and need of FDI in Indian economy in general and service sector in particular.