Foreign Investment plays an important role in the long term economic development of a country by augmenting availability of capital, enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity, generating new employment opportunities and boosting exports. Foreign investment, therefore, is a strategic instrument of development policy. In the wake of economic liberalisation policy initiated in 1991, the government of India has taken several measures to encourage foreign investment, both direct and portfolio, in almost all sectors of the economy. However The emphasis has been on Foreign Direct investment (FDI) inflows in the development of infrastructure, technological upgradation of industry and setting up Special  Economic Zones(SPZs). India has consistently been classified as one of the most attractive investment destinations by reputed international rating organizations. With a vast reservoir of skilled and cost-effective manpower, India offers immense opportunities for business process outsourcing (BPO).Knowledge Process outsourcing(KPO) and engineering Process outsourcing(EPO). Inspite of the fact  thet India is strategically located with access to a vast domestic and south Asian market, its share in World's total flow of direct /portfolio investment to developing countries is dismally low. China with GDP size 2.2 times of India. Similarly Singapore, Indonesia, Philippines, and Thailand also attract  greater amount of Foreign investment than India.