Indian overseas Capital flows [Foreign Direct Investment (FDI) + net Foreign Portfolio Investment (FPI)] increased especially FDI by nearly $12.5 billion during the FY25, the Department of Economic Affairs of the Ministry of Finance noted in its Monthly Economic Review for April 2025.

What is FDI?

• In Indian context: FDI means investment through equity instruments by a person resident outside India in an unlisted Indian company; or in 10% or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.
• FDI is when a company takes controlling ownership in a business entity in another country. 
  • FPI on other hand represents holdings of foreign assets which do not entail active management or control. 
• With FDI, foreign companies aren’t just bringing money with them, but also knowledge, skills and technology.

Reasons for increased capital outflow

• Uncertain global economic scenario: Such as US trade and tariff restrictions have made Indian companies turn “cautious” on investing within the country.
• Due to poor institutional frameworks: In both the home and host countries, India’s overseas investments concentrate on tax havens such as Singapore, Mauritius, and the Netherlands.
• Sharp rise in equity and guarantees: According to the RBI’s Foreign Exchange Department, driven by guarantees issued for overseas subsidiaries as mode of international growth.
• Other: To strengthen their position within the value chains, to capture markets such as Africa, etc.