FDI Inflows in India Increase by 13% to USD 50 Billion for Financial Year 2024-25

Foreign direct investment (FDI) in India decreased by 24.5% to USD 9.34 billion in the January-March quarter of 2024-25, compared to USD 12.38 billion in the same period the previous year. Despite this quarterly drop, FDI grew by 13% to USD 50 billion for the entire previous financial year, as per government data released on Tuesday.

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During the October-December quarter of 2024-25, FDI inflows also fell by 5.6% year-on-year to USD 10.9 billion due to global economic uncertainties. However, total FDI, which includes equity inflows, reinvested earnings, and other capital, reached USD 81.04 billion during the last financial year, marking a 14% increase from USD 71.3 billion in 2023-24.

FDI Sources and Sectoral Growth

Singapore was the largest source of FDI in 2024-25 with inflows of USD 14.94 billion, followed by Mauritius at USD 8.34 billion and the US at USD 5.45 billion. Other significant contributors included the Netherlands with USD 4.62 billion and the UAE with USD 3.12 billion. However, inflows from the Netherlands, Japan, the UK, and Germany declined compared to the previous year.

Sector-wise, FDI increased in services, trading, telecommunications, automobile, construction development, non-conventional energy, and chemicals. However, there was a contraction in computer software and hardware, construction infrastructure activities, and pharmaceuticals.

Regional Distribution and Policy Reforms

Maharashtra received the highest FDI inflow of USD 19.6 billion during the last fiscal year, accounting for a 39% share of total equity inflows. Karnataka followed with USD 6.61 billion and Delhi with USD 6 billion. Gujarat received about USD 5.7 billion while Tamil Nadu got USD 3.68 billion.

The Indian government has implemented an investor-friendly FDI policy allowing most sectors to receive up to 100% overseas inflows through an automatic route. This policy is regularly reviewed to maintain India's attractiveness as a competitive investment destination.

Long-term Trends and Reforms

Over eleven financial years from 2014-25, India attracted FDI worth USD 748.78 billion—a significant increase of 143% over the previous eleven years' inflows of USD 308.38 billion. This accounts for nearly 70% of the total FDI received over the past quarter-century.

The number of source countries for FDI rose from 89 in 2013-14 to 112 in 2024-25, highlighting India's growing global appeal as an investment hub. The government has undertaken reforms across various sectors to liberalise FDI norms further.

Between 2014 and 2019, reforms included raising FDI caps in Defence, Insurance, and Pension sectors while liberalising policies for Construction and Civil Aviation among others. From 2019 to 2024, measures allowed for full foreign ownership under automatic routes in coal mining and insurance intermediaries.

The Union Budget for 2025 proposed increasing the FDI limit from 74% to full ownership for companies investing their entire premium within India.

With inputs from PTI