In the beginning of liberalization when India was facing the financial crises for meeting the external commitments, during the Prime minister Chandra Sekhar government, India had to pledge its gold before World Bank to repay the foreign debts as India had only $1 billion foreign exchange reserves, at the same time, the immediate external payment was more than $25 billion. Therefore, India was bound to opt for liberal economic policy for the inflow and outflow of foreign investment and depreciation of Indian rupees by 300% in comparison of dollar from rupees 8 to rupees 28 per dollar. By which the foreign investors started attracted and investing their funds in India, as the India had and has potential for the growth and diversification of business, since then the India has made remarkable progress in the field of foreign direct Investment but there are lot many challenges and issues needs to be resolved to promote and attract foreign direct investment. The following issues and challenges are listed in the papers: lack of transparent and specific sectoral FDI policy and a limited FDI regime Contributing factors include high tariff rates compared to international standards, a lack of state government decision making power, a limited number of export processing zones, the absence of exit barrier liberalization, stringent labor laws, financial sector reforms, fluctuating exchange rates, and unclear political leadership. In this post, the authors have made an effort to update the best and most plausible conclusions for the justification of foreign direct investment.