According to the latest RBI data, a surprising trend in India’s foreign direct investment (FDI) has caught the attention of the business world. The data reveals a significant shift in FDI flows during April-December 2024.
What’s Happening To India’s FDI?
Net foreign direct investment (FDI) in India — inflows minus outflows — declined to $1.18 billion during April-December 2024. It was $7.84 billion in the same period in 2023. Despite this, gross inward FDI (total foreign investments coming into India) actually increased by 20.6% year-on-year, reaching $62.5 billion. This is with respect to the February 2025 bulletin.
What Caused Drop In FDI?
The primary reason for the drop in FDI is the increase in repatriation/divestment and a sharp rise in outward FDI.
- Repatriation/Divestment: Foreign investors who had already invested in India withdrew funds amounting to $43.99 billion, a sharp rise from $33.06 billion in the previous year.
Outward FDI: There has been a sharp rise in outward FDI (Indian firms investing abroad), which jumped to $17.3 billion from $10.9 billion.
What This Means:
While foreign investment inflows remain strong, the overall net FDI has declined due to more funds leaving the country, either through foreign investors repatriating their investments or Indian companies increasing their overseas investments. This trend suggests capital outflows are growing, which could impact India’s foreign exchange reserves and economic growth prospects if it continues.
According to a Business Standard report- The State of the Economy report in the February 2025 bulletin noted that in gross FDI inflows, manufacturing, financial services, electricity and other energy, and communication services received more than 60 per cent of the gross equity inflows. In 2024, global FDI rose by 11 per cent Y-o-Y but remained below its 10-year average for the third straight year, it added.
