what steps have been taken by the government to attract foreign investment and why?

The government attracts foreign investment in the following ways:

•  Allowing the foreign companies as tax free for the first five years in the industrial zones or SEZs (special economic zones) . 
•  Industrial zones called SEZs (special economic zones) are being setup. SEZs are to have world class facilities,such as electricity, water, roads, transport, storage, recreational & educational facilities.
•  flexibility in labour laws.