India’s FDI Scenario — Record Inflows Amid Global Slowdown

 In News: India’s FDI Scenario — Record Inflows Amid Global Slowdown

Context:

According to the World Investment Report 2025 (UNCTAD) and DPIIT data, India has maintained strong foreign direct investment (FDI) inflows despite a global decline of 11% in total FDI (down to $1.5 trillion in 2024). India climbed one spot to 15th globally in FDI inflows, receiving $28 billion in 2024 (calendar year basis) and $81.04 billion in FY 2024–25 (fiscal basis).

 Key Data Highlights

• Global FDI: Fell by 11% to $1.5 trillion in 2024 — second consecutive year of decline.
• India’s FDI inflows (FY25): $81.04 billion (↑14% YoY, highest in 3 years).
• Net FDI (RBI): $0.4 billion (↓96%), due to high repatriation and outward investments.
• Top source: Singapore ($14.9 billion, 19% share) – leading source for 7 consecutive years.
• Top recipient states:
  • Maharashtra (39%),
  • Karnataka (13%),
  • Delhi (12%),
  • Gujarat, Tamil Nadu, Haryana, Telangana.
• Top sectors:
  • Services (19%),
  • Computer software & hardware (16%),
  • Trading (8%),
  • Manufacturing FDI grew 18% (to $19.04 billion).
• Greenfield investments: India ranked 4th globally in project numbers; $110 billion in capital expenditure (1/3rd of Asia).
• UNCTAD Rank: 15th globally; India leads South Asia in both FDI inflows and greenfield projects.

 Analysis: Key Trends and Implications

1. Global Headwinds:
   • Despite global contraction, India’s steady inflows reflect investor confidence in its macroeconomic fundamentals, digital economy, and manufacturing push (PLI, Make in India, etc.).
   • However, the net FDI plunge signals growing profit repatriation and higher outward FDI by Indian firms ($29 billion), reflecting a maturing but dual-edged trend.
2. Structural Drivers:
   • Singapore’s dominance underscores India’s integration with global financial hubs due to favorable tax treaties and capital gateway status.
   • States like Maharashtra and Karnataka are benefiting from rapid infrastructure expansion and policy stability.
3. Sectoral Shifts:
   • Services and IT sectors continue to dominate, but manufacturing and digital economy FDI show promising diversification.
   • Major investments include Microsoft’s $3B AI & Cloud project and multiple semiconductor and green energy projects.
4. Policy Implications:
   • India’s FDI policy liberalization (100% automatic route in key sectors) is yielding results, but domestic investment bottlenecks remain.
   • The fall in net FDI calls for deeper reforms in factor markets, ease of doing business, and policy predictability.
     
     Updated - Jun 26, 2025  ; 11:23 PM | Business Standard , News On Air & ET