Lower net FDI due to repatriation signals mature market, says RBI governor

RBI governor Sanjay Malhotra explains net FDI decline in FY25 is due to repatriation, reflecting market maturity as gross FDI rose and India remains attractive to investors

The sharp drop in net foreign direct investment (FDI) in 2024-25 (FY25) was due to repatriation, which is a sign of a mature market where investors can enter and exit smoothly, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Friday.

 

Net FDI flows moderated to $0.4 billion in FY25, down from $10.1 billion the previous year, data released by the RBI earlier this month showed.

 

Gross FDI inflows increased by around 14 per cent to $81.0 billion in FY25 from $71.3 billion a year earlier. 

 

“It is germane to point out that this moderation (of net FDI) is on account of a rise in repatriation and net outward FDI while gross FDI actually increased by 14 per cent. Rise in repatriation is a sign of a mature market where foreign investors can enter and exit smoothly, while high gross FDI indicates that India continues to remain an attractive investment destination,” Malhotra said.

 

 

He said external commercial borrowings (ECBs) and non-resident deposits saw higher net inflows compared to the previous year.

 

 

Net inflows under ECBs to India increased to $18.7 billion in FY25 against $3.6 billion a year ago. In April, net ECB to India rose to $2.8 billion from $0.5 billion a year ago. Non-resident deposits recorded a higher net inflow of $16.2 billion in FY25 compared with $14.7 billion a year earlier.

 

“Overall, India’s external sector remains resilient as key external sector vulnerability indicators continue to improve. We remain confident of meeting our external financing requirements,” he said.

 

Foreign portfolio investments (FPIs) to India dropped sharply to $1.7 billion in FY25, as foreign portfolio investors booked profits in equities.

 

According to the RBI’s State of Economy report, more than 60 per cent of gross FDI inflows in FY25 were in manufacturing, financial services, electricity and other energy, and communication services sectors. Singapore, Mauritius, the UAE, the Netherlands and the US accounted for more than 75 per cent of the flows.

 

Repatriation/disinvestment by those who made direct investments in India increased to $51.5 billion in FY25 from $44.5 billion in FY24 and $29.3 billion in FY23.

 

Overseas investments made by Indian companies (outward FDI) increased to $29.2 billion in FY25 from $16.7 billion in FY24 and $14 billion in FY23. Singapore, the US, UAE, Mauritius, and the Netherlands together accounted for more than half of the rise in outward FDI, the report said.