 "India sees 17.9% increase in FDI inflows, at $55.6 bn in Apr-Nov in FY25")
India witnessed a rebound in foreign direct investment (FDI) inflows during the financial year 2024-25 (FY25), the Economic Survey released on Friday showed. Gross FDI inflows rose to $55.6 billion during April-November FY25, marking a 17.9 per cent year-on-year (Y-o-Y) increase from $47.2 billion recorded in the same period of FY24.
As earlier reported by Business Standard, India’s cumulative FDI inflows from April 2000 to September 2024 have exceeded $1 trillion, marking India as a key global investment destination. The services sector remained the top recipient of FDI, accounting for 19.1 per cent of total equity inflows in the first half of FY25. Other key industries attracting foreign investments included:
- Computer software and hardware: 14.1 per cent
- Trading: 9.1 per cent
- Non-conventional energy: 7 per cent
- Cement and gypsum products: 6.1 per cent
These figures reflect India’s growing appeal as a hub for technology-driven investments and infrastructure development.
Global uncertainty looms
Despite the increase in gross inflows, India faces challenges in sustaining net FDI growth. Factors such as global geopolitical tensions, rising interest rates, and inflationary pressures have contributed to short-term fluctuations in foreign investments.
A notable concern is the sharp rise in FDI repatriations, which refers to funds withdrawn by foreign investors as returns on their investments. Net FDI stood at just $0.48 billion during the first eight months of FY25, a sharp decline from $8.5 billion in FY24.
India saw large-scale repatriations of $29.3 billion in FY23 and $44.5 billion in FY24, reflecting investor confidence in the country's financial markets and pointing to the need for policies that encourage profit reinvestment.
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Report on policy reforms
While the survey highlights India’s strong position in attracting foreign investments, it notes that tax stability and regulatory transparency — particularly in areas like Advance Pricing Agreements (APA), which help multinational firms resolve transfer pricing disputes – require further improvements.
To enhance investor confidence, the government has further liberalised FDI policies, enabling foreign investments through the automatic route across various sectors, the survey mentioned. This allows investments without requiring prior government approval, streamlining the process for investors.
FDI remains crucial for financing India’s Current Account Deficit (CAD) — the gap between the value of goods and services imported and exported—and for boosting capital formation, which is essential for economic expansion.
As global competition for FDI intensifies, India must not only compete with emerging markets but also with developed economies offering aggressive incentives to attract foreign investors.
The Union Budget for 2025-26 will be presented by Finance Minister Nirmala Sitharaman on February 1.