Abstract: Foreign direct investment (FDI) is defined as foreign investors stirring their assets into another country where they have control over the management of assets and profits (Graham & Spaulding, 2005). It is generally true that the more FDI a country acquires, the more local economic growth and transformation can develop, because foreign companies often bring to the country large sum of funds and new technologies, as well as advanced management skills which allow local industries and regions to gain a lot of experience (OECD, 2003). While talking about Indian scenario, the hotel and tourism industries have been growing rapidly in recent years, bringing in huge revenues through overseas as well as domestic tourists in many parts of India. There was a key rush to inbound tourism in India in 2006 and a double-digit increase in the coming of overseas tourists to India in the same year. Tourism is one of the third largest revenue generators of foreign exchange for India and also employs one of the highest numbers of manpower. Conde Nast Traveler, one of the most decorated travel magazines, rated India as one of the hottest destination in the world. According to the World Tourism Organization, India will be the leader in the tourism industry in South Asia with 8.9 million arrivals by 2020. India is gradually emerging as the second most rapidly increasing (8.8 percent) tourism economy in the world over 2005-14 according to the World Travel & Tourism.