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The gross capital formation in 1950 is just 10.8. It increased to 25.9 in 2000. Today it is around 36.83 percent in 2017. It is a new LPG policy introduced in 1991 which is a magnetic factor to fetch huge FDI to increase the gross capital formation. 100 percent FDI in the industrial sector and in retail marketing initiated a process of industrial revolution 4.0 in the 21st century. FDI in developing countries grew more than six fold between 1990 and 2000 faster than either GDP or trade (mody 2004). It is now the largest source of external finance for developing countries (UNCTAD - 2000). FDI contributes directly and indirectly in building national capabilities. It is considered the best complement to domestic investment to bridge a gap between the investment needs of the country and its saving. FDI has long term and substantial development impact on the Indian economy. It helps in transfer and update of technology, improves skills and managerial capabilities. It provides competitive edge to the country’s exports, improves efficiency and quality of services and goods.