The policies of liberalization have not yet helped India improve her share of FDI inflow from major European countries and USA. Given the target of the government towards achieving a high growth of GDP, it is crucial to raise the ratio of FDI actual to approvals. The study is rendered from two standpoints: industry and state perspectives.The characteristic features of states attracting FDI has been dealt with in greater detail. The impact of FDI on various economic and social parameters has also been explored. At the industry level, the most important and hitherto unknown factor that has come to light is the significance of R&D in attracting FDI in the country. Marketing, export and energy intensive industries attract FDI much more than others. As far as impact of FDI is concerned, it is revealed that FDI leads to improvement in labour productivity and employment. It also crowds-in domestic investment and at the same time exerts a positive impact on R&D.