The country that this essay will use as a case study is India. India is interesting because the country has become FDI intensive in recent years, following its economic liberalization in the early 1990s. Before that, the Indian economy was subject to strict controls and regulation on foreign capital and foreign ownership. Foreign direct investment (FDI) has been particularly targeted in these reforms to benefit from the inflow of capital and other assets such as technology and knowledge. Since the liberalization of FDI policy, India has seen a massive increase in FDI flows (see Figure 1). The services sector and the computer software and hardware sector received the largest share of FDI flows, followed by the telecommunications, transportation, fuels and chemicals sectors (Figure 2). The main concept discussed in this essay is foreign direct investment. FDI is, according to the OECD, “a category of cross-border investment made by an entity resident in an economy (the direct investor) with the aim of establishing a lasting interest in an enterprise (the investment enterprise direct) which resides in an economy”. an economy other than that of the direct investor. Businesses invest in foreign economies in order to exploit their particular advantages and FDI is the preferred process, as opposed to licensing, agreements and exports. Advantages that companies often possess are patented technology, management skills, marketing skills, and brand names. Other concepts covered are linkages and spillovers. Spillovers can be defined as the effects that occur when the production function of producers is affected not only by their business activities but also by those of other economic agents. Links are a means by which spread...... middle of paper...... evidence. Since the FDI and industrial policy reforms in the 1990s, market-seeking factors have played an important role in attracting FDI, such as market size and growth, as well as stability. economic. Furthermore, as India's debt-to-GDP ratio falls, more investments are expected. Later, after its industrial policy reforms, India began attracting efficiency-seeking FDI with its language resources and cheap capital. Infrastructure is an important factor in attracting FDI, but the quality varies across states. Capitalization of these FDIs through linkages and spillovers is also an important topic in the investment literature in India. A commonality among studies on spillovers in Indian industry is that technology transfer and FDI spillovers are highly dependent on the absorptive capacity of domestic firms, particularly R&D efforts...