Recent studies show that the share of service sector has increased to 60% of the entire global FDI stock. Now developed countries and developing countries are competing to attract foreign direct investment in services. The advancement in the information and communication technologies has added magnetism to the tradability of services across the border. This article gives a note on the importance of FDI in service sector and how it benefits the host country's economy.

Foreign Direct Investment (FDI), along with cross border international trade is a basic element in attaining increased living standards and economic prosperity. It is not just for economies as a whole, but also for individuals, consumers and companies that foreign capital is a requirement if not a necessity. FDI is the investment by foreigners that aggressively involves investors in the operations of local companies, and has played a key role in the growth of most western and newly emerging economies for the last five decades. In general phrasing, the services are largely intangible, invisible, and perishable and entail simultaneous production and consumption. The service involves a direct interaction between the producers and the consumers. There are some situations in which this definition does not hold true because there are services with an element of tangibility, visibility and storability.

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