Foreign direct investment (FDI) in India grew 18 per cent during 2016 to touch $46 billion, data released by the Department of Industrial Policy and Promotion (DIPP) showed.
The country attracted FDI of $39.32 billion in 2015.
The main sectors which attracted the highest foreign inflows include services, telecom, trading, computer hardware and software and automobile.
Bulk of the FDI came in from Singapore, Mauritius, the Netherlands and Japan.
The government has announced several steps to attract foreign inflows. The measures includes liberalisation of FDI policy and improvement in business climate.
The Finance Minister had announced in the Budget 2017-18 to further relax foreign investment norms and also phase out the Foreign Investment Promotion Board (FIPB).
Foreign investments are considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
A strong inflow of foreign investments will help improve the country's balance of payments situation and strengthen the rupee value against other global currencies, especially the US Dollar.