Effectiveness of Tax Incentives in Promoting Foreign Direct Investment in India

This study explores how tax incentives promote FDI in India. FDI drives economic growth by providing capital, technology, and jobs. Tax incentives are used by governments worldwide to attract foreign investors, although their impact on FDI is unclear. This study’s objective is to assess how well the Indian government’s tax incentives have encouraged foreign direct investment. The study employs a descriptive research design to examine secondary data derived from official papers, international organisations, and scholarly journals. Tax incentives are one aspect that attracts foreign direct investment (FDI), but other factors like political stability, market size, and infrastructure quality also play a role, according to the findings. Comparative analysis with other emerging economies reveals that India’s tax incentives are competitive but need to be part of a broader, more comprehensive policy framework to maximise their impact. The study concludes with policy recommendations aimed at optimising tax incentives to enhance FDI inflows, thereby contributing to India’s economic growth and development.