For a country India, that is a developing economy (Banerjee, 2009, p. 75), the element of F.D.I is a mixed phenomenon. It brings along a whole set of conditions, requirements and parameters that are to be taken into regard with reference to processing the foreign direct investment. There are certain industries where the F.D.I benefits the overall health and outlook of the economy, for others there are areas where the Foreign Direct investment does not auger well. This paper looks into the overall scenarios, the determinants, the positives, the negatives, the constraints and considerations that are needed to be taken into account with regard to the Foreign Direct Investment and economy of India.

The F.D.I comes into play on account of the meager outlook of the developing states where the resources are limited compared to the overall needs. Owing to this, the country aims for foreign investments. The foreign investment comes along with set of conditions, rules and regulations which makes up for the loss of free environment.

Erdal Demirhan and Mahmut Masca have undertaken an investigative study of the developing countries with regard to the F.D.I and the determinants associated with it. Their study takes into account a total of over thirty eight developing countries that have been checked for the impact of F.D.I upon their economy (Demirhan & Masca, 2008). The determinants are presented in the form of variables. These variables are the per capita income, the G.D.P growth rate, labor rates, the overall rate of inflation against the given annual budget and most importantly the tax to G.D.P ratio and overall tax net. These elements have been assessed for to give a clear account of the F.D.I and its overall feasibility against a given economy such as India in this particular case.

In order to present the scenario of Indian economy and the overall impact of F.D.