The Foreign Direct Investment plays a noteworthy role in today’s world. There is hardly any country in this world which is not making the use of FDI. Mostly the underdeveloped countries like India have to depend on foreign capital for financing their development programs because these countries suffer from low level of income and capital formation. Foreign Direct Investment provide benefits both to the home country and the host country For the economic development a backward and developed country will have to import machinery, technical know-how, spare parts and even raw materials. One way of paying for imports will be to step up exports. The other way is through getting foreign technology and equipment with the help of foreign assistance. FDI may be in any forms such as direct entrepreneurial investment, foreign collaboration, bilateral government funding arrangement, NRI deposits and investment loans from international financial institutions and external commercial borrowing.