Trade liberalization in India post 1991 has transformed the scenario of capital influx in the country and has triggered the growth of secondary and tertiary sectors significantly. The growth dynamics of Indian economy especially the service sector propelled forward.

India is gaining importance globally as a rapidly developing economy. Investors from all over the world has showed faith in the flexible Indian economy. One of the major factor for rapid economic growth in India after 1991 can be attributed to huge inflow of foreign capital.

The current trends of the foreign direct investment show a stark increase in the Asian developing countries. However the flow has been declining in other regions, especially in the developed economies. Inflow of foreign funds to India nearly doubled, reaching an estimated US$59 billion (Unctad 2015).

Perfect market is a hypothetical market characterised by large number of buyers and sellers in the presence of perfect knowledge. Similarly, perfect market assumes the presence of homogeneous product, total absence of government intervention and no transportation costs.