Foreign Direct Investment (FDI) in India
The latest data on FDI highlights the fragile nature of India's attractiveness as an investment destination. The net FDI was negative for the third consecutive month in October 2025, indicating more direct investment was taken out of India than invested in it.
Impact of U.S. Tariffs
- In July 2025, U.S. President announced a 25% tariff on India, later increased to 50%.
- This tariff announcement coincided with the start of investment outflows from India.
FDI Trends in 2025-26
- Until July 2025, the net FDI was comfortable, with $10.7 billion in April-July 2025, over three times that of the previous year.
- In August 2025, there was a $622 million withdrawal, followed by $1.7 billion in September, and $1.5 billion in October.
- The cumulative net FDI by October 2025 was $6.2 billion, nearly double that of April-October 2024, but the trend had reversed.
Reasons for FDI Outflow
- The net FDI decline is partly due to outflows exceeding robust inflows. August and October saw lower gross inflows year-on-year.
- Outflows were driven by Indian companies investing abroad, indicating international competitiveness but raising questions about domestic investment.
Government Measures and Investor Confidence
- Measures such as corporate tax rate cuts, Production Linked Incentives, and tax cuts aimed to boost investment.
- Despite these efforts, tariffs from one country impacted India's image as a reliable investment destination.
Conclusion
- India's investment appeal requires genuine structural reforms to withstand global economic pressures and build investor confidence.
