Foreign direct investment (FDI) is a very sensitive issue in India. Technically, FDI denotes a cross-border flow of capital as a factor of production. Hence, FDI tends to be an equalizer of capital to labour ratio among the economies creating conditions for a market oriented flow of trans-border capital. FDI, however, brings a lot along with its spatial movement. Being more than just the shift of capital from one place to another, it also embodies a permanent change in the ownership structure of productive assets and a dynamic wave of technological and organizational innovations in the host economy. Moreover, FDI strikes at the contemporary capital labour relationship, income and assets distribution and stake holder equilibrium. That is why it becomes highly desirable as well as extremely debatable from the point of long term interests and socio-economic stability of the host country. The present paper, which is based on secondary data and literature review in the field, attempts to discuss the need, rationale and impact of FDI in India. The debate is kept limited to the role of FDI in growth and employment augmentation, especially in the context of some of the innovative steps undertaken by the government of India like ‘Make in India’ and ‘Skill India’ programmes.