New Delhi: India’s economic landscape continues to shine as a beacon for global investors, with gross Foreign Direct Investment (FDI) inflows soaring to an impressive $81.04 billion in the fiscal year 2024-25, marking a robust 14% increase from the previous year. According to provisional government data, this surge underscores India’s growing appeal as a prime investment destination. Despite a moderation in net FDI inflows to $0.4 billion due to increased repatriation, the Reserve Bank of India (RBI) Governor Sanjay Malhotra emphasized the significance of gross FDI figures, which offer a clearer picture of the country’s investment attractiveness.
Gross FDI vs. Net FDI: Understanding the Metrics
Foreign Direct Investment (FDI) refers to investments made by non-residents in Indian companies, either through equity instruments in unlisted firms or by holding 10% or more of the post-issue paid-up equity capital in listed companies on a fully diluted basis. In contrast, Foreign Portfolio Investment (FPI) involves holdings of less than 10% and saw a decline to $1.7 billion in 2024-25 as investors booked profits in equities.
Gross FDI represents the total investment made by foreign entities into India’s productive assets, while net FDI is calculated by subtracting outward FDI flows (including repatriation by foreign firms and outward investments by Indian firms) from inward FDI flows. In FY25, gross FDI reached $81.04 billion, reflecting a 14% year-on-year growth, with FDI equity inflows alone crossing $50 billion, up 13% from $44.42 billion in 2023-24. However, net FDI moderated to $0.4 billion from $10.1 billion in the previous year, primarily due to a 16% increase in repatriation, which reached $51.5 billion, and a rise in outward FDI by Indian firms to $29.2 billion, up 75% from $16.7 billion in FY24.
RBI Governor Sanjay Malhotra addressed concerns over the dip in net FDI, urging stakeholders to focus on gross FDI figures. “While net FDI is important from a foreign exchange reserves management perspective, when it comes to understanding the investment landscape, gross FDI matters far more,” he stated during the announcement of the latest monetary policy decisions on June 6, 2025. Malhotra highlighted that the rise in repatriation signals a maturing market, allowing foreign investors to enter and exit seamlessly, reflecting the resilience of India’s financial ecosystem.
Key Drivers of FDI Growth in India
Several factors have contributed to India’s robust FDI inflows in 2024-25, positioning the country as a competitive and attractive investment destination. These include:
1. Investor-Friendly Policy Regime
India’s investor-friendly FDI policy allows 100% FDI through the automatic route in most sectors, eliminating the need for prior government approval. Flagship reforms such as the Goods and Services Tax (GST) rollout and the National Logistics Policy have streamlined business operations, enhancing investor confidence. The commerce and industry ministry stated, “This policy is reviewed on an ongoing basis to ensure that India remains an attractive and competitive investment destination.”
Significant reforms between 2014 and 2019 include increased FDI caps in sectors like Defence, Insurance, and Pension, alongside liberalized policies for Construction, Civil Aviation, and Single Brand Retail Trading. From 2019 to 2024, the government further relaxed norms, allowing 100% FDI under the automatic route in coal mining, contract manufacturing, and insurance intermediaries. The Union Budget 2025 proposed increasing the FDI limit from 74% to 100% for companies investing their entire premium within India, further boosting investor appeal.
2. Sectoral Appeal
The services sector, encompassing finance, IT, R&D, and consultancy, remained a key driver of FDI, attracting $9.34 billion in 2024-25. The manufacturing sector also witnessed a resurgence, with FDI growing by 18% to $19.04 billion from $16.12 billion in FY24, fueled by Production Linked Incentive (PLI) schemes. Other sectors recording growth include trading, telecom, automobile, construction development, non-conventional energy ($4 billion), and chemicals. However, sectors such as software and hardware, infrastructure, and pharmaceuticals experienced a contraction in FDI inflows.
3. Sub-National Reforms
State-level reforms have played a pivotal role in attracting FDI. States like Maharashtra, Karnataka, Gujarat, Delhi, and Tamil Nadu have implemented infrastructure readiness, investor outreach programs, and industrial policy reforms to create a conducive environment for foreign investment. These efforts have significantly contributed to the uneven distribution of FDI across states, with Maharashtra leading the pack.
Top FDI Sources and State-Wise Distribution
Major Source Countries
Singapore emerged as India’s top FDI source in 2024-25, contributing $14.94 billion, followed by the United States with $5.45 billion and Mauritius with $3.73 billion. Together, these three countries accounted for nearly 58% of total FDI equity inflows. However, inflows from countries like the Netherlands, Japan, the UK, and Germany saw a decline, reflecting a shift in investment patterns. Notably, the number of source countries for FDI increased from 89 in 2013-14 to 112 in 2024-25, underscoring India’s growing global appeal.
State-Wise FDI Inflows
Maharashtra topped the list of FDI recipients, attracting $19.6 billion in 2024-25, accounting for 39% of total FDI equity inflows. Karnataka followed with $6.61 billion (13%), Delhi with $6 billion (12%), Gujarat with approximately $5.7 billion, and Tamil Nadu with $3.68 billion. Other states like Haryana ($3.14 billion) and Telangana ($2.99 billion) also recorded significant inflows, highlighting the regional concentration of FDI in India’s economic hubs.
Trends in Outward FDI and Global Context
India’s outward FDI has witnessed a remarkable shift, with a 75% increase to $29.2 billion in FY25 from $16.7 billion in FY24. The RBI noted that this trend aligns with the global rise of emerging market economies (EMEs) as major sources of foreign investment. The share of G20-Emerging Market (G20-EM) countries in global FDI outflows increased from 9.7% in 2009 to 16.5% in 2023, with India playing a significant role. Notably, 51.1% of India’s outward FDI from 2019 to 2024 was directed toward developed economies, signaling the global expansion of Indian multinationals.
Malhotra emphasized that high gross FDI alongside healthy outward FDI showcases India’s growing role in the global investment landscape. “Rising gross FDI reflects not just investor confidence in India’s domestic growth story but also the global expansion of Indian firms,” he noted.
Challenges and Outlook
Despite the robust growth in gross FDI, the moderation in net FDI to $0.4 billion in FY25, down from $10.1 billion in FY24, raised concerns among some analysts. The increase in repatriation by foreign investors, which rose by 16% to $51.5 billion, contributed significantly to this decline. However, Malhotra brushed off these concerns, describing repatriation as a natural outcome of a maturing market. He highlighted that the ability of foreign investors to enter and exit seamlessly reflects the depth and resilience of India’s financial ecosystem.
The final quarter of FY25 saw a 24.5% decline in gross FDI to $9.34 billion, indicating a slowdown in momentum. Nevertheless, the overall growth in FDI inflows over the past eleven years (2014-25) is remarkable, with India attracting $748.78 billion, a 143% increase over the $308.38 billion received between 2003 and 2014. This constitutes nearly 70% of the total $1,072.36 billion in FDI received over the past 25 years, underscoring India’s transformation into a global investment hub.
Looking ahead, the Federation of Indian Export Organisations (FIEO) projects that exports will rebound in FY26, potentially touching $1 trillion, further enhancing India’s attractiveness as an investment destination. The government’s ongoing efforts to liberalize FDI norms and improve the ease of doing business are expected to sustain this momentum.
Conclusion
India’s FDI inflows in 2024-25 reflect its emergence as a global investment powerhouse, driven by investor-friendly policies, sectoral appeal, and state-level reforms. The 14% surge in gross FDI to $81.04 billion, with equity inflows crossing $50 billion, highlights the confidence of global investors in India’s growth story. While net FDI moderated due to increased repatriation and outward investments, RBI Governor Sanjay Malhotra emphasized the importance of focusing on gross FDI to gauge India’s investment appeal. With Singapore, the US, and Mauritius leading as top FDI sources and states like Maharashtra, Karnataka, and Delhi attracting significant inflows, India continues to solidify its position as a competitive and resilient investment destination. As the government continues to liberalize FDI norms and foster a conducive business environment, India’s economic trajectory looks promising, with the potential to further elevate its global standing in the years to come.
Frequently Asked Questions (FAQs)
What was the total gross Foreign Direct Investment (FDI) inflow in India for the fiscal year 2024-25, and how does it compare to the previous year?
In the fiscal year 2024-25, India recorded gross FDI inflows of $81.04 billion, reflecting a 14% increase from the previous year (2023-24). FDI equity inflows alone surpassed $50 billion, marking a 13% year-on-year growth compared to $44.42 billion in 2023-24. This growth highlights India’s growing appeal as a global investment destination.
Why did net FDI inflows decline in 2024-25 despite the rise in gross FDI?
Net FDI inflows dropped to $0.4 billion in 2024-25 from $10.1 billion in 2023-24 due to a 16% increase in repatriation by foreign investors, reaching $51.5 billion, and a 75% rise in outward FDI by Indian firms, totaling $29.2 billion. RBI Governor Sanjay Malhotra noted that this moderation reflects a maturing market, allowing seamless entry and exit for foreign investors.
Which countries were the top sources of FDI for India in 2024-25?
Singapore was the top FDI source, contributing $14.94 billion, followed by the United States with $5.45 billion and Mauritius with $3.73 billion. These three countries accounted for nearly 58% of total FDI equity inflows. However, inflows from countries like the Netherlands, Japan, the UK, and Germany saw a decline.
Which Indian states received the highest FDI inflows in 2024-25?
Maharashtra led with $19.6 billion, accounting for 39% of total FDI equity inflows, followed by Karnataka ($6.61 billion, 13%), Delhi ($6 billion, 12%), Gujarat (approximately $5.7 billion), and Tamil Nadu ($3.68 billion). Other states like Haryana ($3.14 billion) and Telangana ($2.99 billion) also attracted significant investments.
What are the key factors driving the increase in FDI inflows to India?
The rise in FDI is driven by an investor-friendly policy regime allowing 100% FDI via the automatic route in most sectors, flagship reforms like GST and the National Logistics Policy, and sectoral appeal in services ($9.34 billion) and manufacturing ($19.04 billion, up 18%). State-level reforms, such as infrastructure readiness and industrial policy changes, have also played a crucial role in attracting investments.
