The Indian government has argued that economic reforms are essential for the Indian economy. One of the major elements in economic reform is to make the country attractive for foreign private investment, FDI for short. The argument in its favor goes as follows. FDI follows from the recognition by the foreign investors in a particular country's potential for making profits.
Foreign investors bring in their own capital and take the necessary risks.
The only thing that discourages its flow are government regulations that hamper the freedom of the foreign investor to promote such productivity. Hence the need for economic liberalization. These regulations are promulgated either by executive office or through legislation. It may deny FDI in some key sectors of the economy. It may restrict the amount of profits than can be repatriated.