Foreign Direct Investment, a term which most of the people in India who could afford a newspaper or a television, became aware of during the second term of the UPA Government. The term earned its spotlight after a heated debate regarding place regarding it on the floor of Lok Sabha. Foreign Direct Investment is actually a mechanism to increase the flow of foreign exchange into the country and thus strengthen the economy in the face of todays global conditions. After 1991, the Indian economy picked up speed but soon after two decades of terrific growth, we started to slow down. It was because we could not gain access to the vast resource, in form of capital abroad. FDI, today is an important source for economic progress. This paper tries to compare the pros and cons of increasing FDI in various sectors of the economy and tries to analyze as to how the cons can be weighted down. Lastly it explains the changes in the Legal structure which are required to make our economy grow with destroying out indigenous producers. Keywords: foreign direct investment, foreign exchange, retail sector, law and economy