India is among the world's top three preferred investment destination, but equity caps limit the size of potential inflows, according to a Columbia University report.
The report cited liberalisation in FDI policy and several economic sectors, a globally competitive workforce, and rapid GDP and market growth as the main drivers of foreign investment in India.
Yet, it said equity caps limit the size of potential new inflows and national security concerns might prompt more oversight of FDI approval processes.
According to the 15-page report 'Inward FDI in India and its policy context' India is also the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000.
The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services.
Among other visible trends, firms in developed countries dominated investment in the 1990s, but in the past decade developing country investors have also become significant, it said.
A third of the post-2000 inflow is invested around Mumbai, a manufacturing hub, and one-fifth around Delhi, a services hub.