India’s FDI Slows in FY25, Yet Russian Inflows Reach Record Levels

India witnessed a slowdown in Foreign Direct Investment (FDI) inflows in FY25, with total inflows dropping to $62.48 billion (April-December 2024) compared to $71.27 billion in FY24 and $71.35 billion in FY23. This decline suggests a more cautious stance from global investors, despite India’s ongoing policy reforms aimed at improving the investment climate.

However, within this broader trend, an exception has emerged—Russia’s FDI equity inflows into India surged more than threefold, reaching $18.45 million in FY25, compared to $5.16 million in FY24. This marks the highest inflow from Russia in 4 years, reflecting deepening economic cooperation between the 2 nations.

Foreign Investment Trends in India

(*April-December data)

Total FDI inflows in India include equity inflows, equity capital of unincorporated bodies, reinvested earnings, and other capital. The decline in FDI inflows suggests global investors are reassessing their exposure to India amidst global economic uncertainties, inflationary pressures, and shifting geopolitical dynamics.

Volatility in FPI Inflows: A Net Outflow in FY25

Foreign Portfolio Investment (FPI) inflows have also shown increased volatility. After registering a net inflow of $41.04 billion in FY24, the trend reversed in FY25, with a net outflow of $1.68 billion (as of March 5, 2025).

This shift indicates a cautious approach by foreign investors, potentially driven by concerns over global interest rate policies, currency fluctuations, and economic uncertainties.

Government Measures to Attract Foreign Investments

To maintain its appeal as a preferred investment destination, the Indian government has taken proactive steps to liberalise and streamline investment policies.

Key FDI Policy Reforms

India allows 100% FDI under the automatic route in most sectors, except for a few strategic industries. Recent FDI policy changes have targeted sectors such as:

• Defence
• Telecom
• E-commerce
• Civil Aviation
• Pharmaceuticals
• Insurance
• Digital Media
• Coal Mining

The government regularly reviews FDI policies to ensure that India remains a competitive investment hub globally.

Reforms to Facilitate Foreign Portfolio Investment (FPI)

To encourage foreign portfolio investments, several regulatory and procedural reforms have been introduced, including:

• Simplified onboarding and registration processes for FPIs
• Approval for FPIs to trade in Exchange-Traded Commodity Derivatives (ETCDs)
• Expanded participation of NRIs, OCIs, and Resident Indians in SEBI-registered FPIs
• Reclassification framework allowing FPI investments to convert into FDI under specific conditions

These initiatives align with the broader objective of enhancing ease of doing business in India and boosting capital inflows into the financial markets.

Conclusion

While India has experienced a decline in overall FDI and net outflows in FPI, policy measures continue to be directed towards attracting and sustaining foreign investments. Meanwhile, Russia’s sharp increase in FDI equity inflows highlights strengthening bilateral trade and investment ties. As India refines its investment framework, global investor sentiment and geopolitical factors will play a key role in shaping future FDI and FPI trends.

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