Is India getting FDI right? Economic Survey records 18% growth in first 8 months of 2024-25

India recorded a revival in foreign direct investment (FDI) for the fiscal year 2025, with gross inflows rising from $47.2 billion in the first eight months of FY24 to $55.6 billion in the same period of FY25, marking a year-on-year growth of 17.9%, according to the Economic Survey 2024-25.

Over the long term, FDI inflows into India have exceeded $1 trillion from April 2000 to September 2024, reinforcing the country’s status as a significant global investment hub.

According to the survey, citing the Department for Promotion of Industry and Internal Trade (DPIIT), cumulative FDI inflows, including equity, reinvested earnings, and other capital, reached $1,033.4 billion during this period.

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The survey said India must pull all stops wooing FDI and making itself more attractive.

“There is room to improve tax certainty and tax stability in matters such as APA (Advance Pricing Agreement). India has simplified many of its laws, rules and regulations over the years leading to a regime shift in terms of the ease of doing business compared to yester years,” the survey said.

Sectorally, according to the survey, the services sector remains the largest recipient, accounting for 19.1% of total equity inflows in the first half of FY25. Other sectors attracting substantial foreign investment include computer software and hardware (14.1%), trading (9.1%), non-conventional energy (7%), and cement and gypsum products (6.1%).

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Despite short-term global market volatility due to inflation, rising interest rates, and geopolitical tensions, the long-term outlook for FDI in India remains positive, supported by robust economic fundamentals and ongoing structural reforms, added the survey.

While FDI inflows have recently been scrutinised due to concerns about declining numbers, global factors such as economic uncertainty and rising borrowing costs have impacted flows.

Notably, even with increased gross FDI in FY25, there has also been a rise in repatriations as international companies realize returns on investments. Many multinationals have leveraged India’s strong stock market through secondary sales and IPOs, reflecting investor confidence.

From January to September 2024, private equity and venture capital exits from Indian stock markets reached $19.5 billion, up from $18.3 billion in the previous year.

Despite ranking high in greenfield project announcements and international project finance deals, net FDI for the first eight months of FY25 was $0.48 billion, down from $8.5 billion during the same period in FY24. Additionally, repatriation amounts have surged, with $39.6 billion recorded up to November 2024, indicating a trend of foreign investors taking profits.

While these developments highlight successes in foreign investment, they also reveal a need for vigilance regarding net inflows as India navigates the complexities of global investment dynamics.