IMPACT OF FDI ON ECONOMIC GROWTH AND EMPLOYMENT IN INDIAN MANUFACTURING AND SERVICE SECTOR

Abstract

Foreign Direct Investment (FDI) plays a pivotal role in driving economic growth and employment, particularly in developing economies like India. This study examines the impact of FDI on economic expansion and job creation in India’s manufacturing and service sectors. Over the past decades, India has emerged as a preferred investment destination due to policy reforms, liberalization measures, and an improving business climate. While FDI inflows have significantly contributed to industrial development, technological advancements, and infrastructure enhancement, their effects on employment generation remain a subject of debate. The manufacturing sector benefits from FDI through capital infusion, skill development, and the adoption of advanced production techniques, leading to increased productivity and competitiveness. Similarly, the service sector, particularly in IT, retail, and financial services, has witnessed remarkable growth due to foreign investments, fostering innovation and improving service delivery standards. However, concerns persist regarding sectoral imbalances, dependency on foreign capital, and the quality of employment generated. This study employs empirical analysis to assess the relationship between FDI inflows, GDP growth, and employment trends in both sectors. Findings suggest that while FDI has positively influenced economic expansion, its employment impact varies across industries. The research emphasizes the need for strategic policy interventions to maximize FDI benefits, promote inclusive growth, and ensure sustainable job creation. Strengthening domestic industries, enhancing labor market policies, and fostering innovation-driven investments are crucial for leveraging FDI as a catalyst for long-term economic progress.