Foreign Direct Investment to Service Sector in India

Abstract

Foreign Direct Investment (FDI) plays important role in the economic development of a country.  In 1991, Liberalization, Privatization and Globalization aimed at making the Indian economy a faster growing economy and globally competitive. Service sector is one of the largest and fastest growing sectors in India. The share of services in India’s GDP at factor cost (at current prices) rose from 51 per cent in (2000-01) to 57 per cent in (2013–14). This paper highlights the role of FDI in various sectors like financial services, Telecommunication services, Information Technology services, Construction development etc. in the Indian economy and contribution of each sector year wise. We have dealt with the effect of FDI inflows on the Indian economy over the period of 2000 to 2014 on the basis of secondary data. A statistical model was developed to investigate the relationship between FDI inflow and Gross Domestic Product in service sector. This analysis has revealed that Foreign Direct Investment has positive and significant impact on GDP.

Keywords: Foreign Direct Investment, Service Sector, Globalization.