: Foreign direct investment is a powerful tool for economic growth of all sectors of any country for strengthening its domestic capital, productivity and help to tackle with unemployment. This paper has been presented to interpret the significance of FDI in the overall growth of Indian economy. The study also covers the trends of FDI (inflow and outflow) in India after liberalisation selecting period from 1990 to Feb2012. The data and information have been collected from the secondary source. India, in recent times, has emerged as a preferred location for many foreign international enterprises due to some factors like high economic growth, fast population growth, a large english speaking population and low cost for workers. In 2011, India’s public debt stood at 71.42% of GDP which is highest among the emerging economies. Service sector is the highest invested sector of India with 57.2% of country’s GDP, whereas industry and agriculture sector contribute 28.6% and 14.6% respectively. When it comes to employment, agriculture accounts for 52 % of employment, service sector for 34% and industrial sector for 14% but the share of agriculture sector in employment has showed a decrease in recent years. According to “Global Manufacturing Competitiveness Index” by Deloitte Touche Tohmatsu and the US Council on Competitiveness, in 2011, India, was ranked 2nd in the world in term of manufacturing capability. During April-December 2010 period, approximately 50 sub-sectors in India’s manufacturing sector grew by 39% achieving the “excellent growth” category. In 2009-2010, India’s top five trading partners were United Arab Emirates, China, United States, Saudi Arabia and Germany. India has received 18th rank in world with a 20.4 US $ Bn FDI inflows being 1.36% of world total. Now, the time has come for India to realize its capability as a most preferred and major destination for foreign direct investment. In relation to FDI, the paper finds that service sector, manufacturing sector and power sector etc. are the major sectors contributing to the growth of Indian economy particularly the second decade of liberalisation immensely positive.