Foreign Direct Investment (FDI) Trends 2024-25
The FDI numbers for 2024-25 have sparked considerable public and policy interest due to contrasting gross and net figures. Although India attracted $81 billion in gross FDI, the net FDI was only $0.35 billion, marking the lowest in two decades.
Factors Affecting Net FDI
- Substantial repatriation and disinvestment by foreign firms, with over $51 billion repatriated.
- Increased outbound investment by Indian corporations, rising by about 75% to reach $29.2 billion.
Normal Economic Behavior vs. Concerning Trends
While repatriation and overseas investment are normal for a large, open economy like India, the scale of outflows is concerning. In 2023-24, net FDI was only about $10 billion despite gross FDI being over $71 billion.
Analysis by Policy Makers
- The finance ministry has noted significant outbound FDI, increasing by nearly $12.5 billion during FY25.
- Questions arise about why foreign firms aren't reinvesting in India, given its status as the fastest-growing large economy and fourth-largest globally.
Indian Corporations' Outbound Investment
The reluctance of Indian corporations to invest domestically, despite global uncertainties, is curious. The jump in outbound FDI could be due to concurrent attractive deals.
Policy Considerations
- A deeper examination of these trends is necessary, but without setting barriers on fund transfers that could negatively impact the investment climate.
- FDI is crucial for India's sustained growth as it brings capital, technology, and best practices, addressing the savings-investment gap in the economy.