Foreign Direct Investment (FDI) is considered to be a powerful tool for economic growth in developing countries like India. It has the potential to stimulate domestic investment, create employment opportunities, and enhance technology transfer. In recent times, FDI inflows have become an important source of external funding for many economies. In the case of India, FDI inflows have shown a significant increase in the past two decades and have played a crucial role in its economic development. India has emerged as one of the top destinations for FDI inflows over the years due to its vast market size, skilled workforce, and liberalized investment policies. The key factors influencing this relationship are cost-efficiency, technological advancements, market expansion, financial stability, and political stability within a country. When implemented effectively through efficient utilization and allocation mechanisms such as investing in productive sectors with high multiplier effects on output, FDIs can stimulate demand conditions leading to long-term positive impacts on GDP growth.