Net FDI in India Drops by 96% to $0.4 Billion in FY25

Net foreign direct investment into India dropped drastically to just $0.4 billion in the financial year 2024–25, a steep fall from $10.1 billion in FY24 and $28.0 billion in FY23. This decline of over 96% is attributed to a surge in repatriation and increased outward investments by Indian companies.

Interestingly, gross FDI inflows into India remained strong. According to data released in the Reserve Bank of India’s May 2025 bulletin, gross inflows reached $81 billion in FY25, marking a year-on-year growth of 13.7%. This compares to $71.3 billion in FY24 and $71.4 billion in FY23, indicating continued global investor interest in India despite the fall in net figures.

The decline in FY25 is “a sign of a mature market where foreign investors can enter and exit smoothly, which reflects positively on the Indian economy,” said the State of the Economy report by the Reserve Bank of India (RBI) in its monthly bulletin (May 2025).

Repatriation and Disinvestment See Notable Increase

The fall in net FDI was primarily caused by a sharp increase in repatriation or disinvestment by foreign investors. These outflows rose to $51.5 billion in FY25, up from $44.5 billion in FY24 and $29.3 billion in FY23. The Reserve Bank of India described this trend as a marker of maturity in the Indian market, where foreign investors can move capital in and out with flexibility.

Read More: India’s FDI Slows in FY25, Yet Russian Inflows Reach Record Levels. 

Sectoral Distribution of Inflows Reflects Strategic Focus

More than 60% of gross FDI inflows in FY25 were directed into key sectors such as manufacturing, financial services, electricity and other forms of energy, and communication services. This indicates sustained interest in India’s core economic segments, especially those aligned with infrastructure and digital expansion.

Key Source Countries for FDI Remain Consistent

Singapore, Mauritius, the United Arab Emirates, the Netherlands, and the United States were the top contributors to India’s gross FDI in FY25. These 5 countries accounted for over 75% of total inflows, continuing a trend of long-standing investment relationships with India. 

Outward FDI by Indian companies also saw a significant increase, rising to $29.2 billion in FY25 from $16.7 billion in FY24 and $14 billion in FY23. The same countries that are leading sources of inbound investment also played a major role in hosting Indian investments abroad.

Services Sector Dominates Outbound Capital Allocation

Indian firms primarily channelled their outbound investments into financial, banking and insurance services. Manufacturing followed as the next major segment, along with wholesale and retail trade, and hospitality. These sectors together accounted for over 90% of the outward FDI, underlining a pattern of diversification and global expansion among Indian corporates.

Conclusion

While net FDI into India recorded a substantial decline in FY25, the overall investment activity—both inbound and outbound—paints a picture of a maturing and increasingly integrated economy. The rise in gross inflows, the strength of key sectors, and the significant increase in outward investments reflect both investor confidence and strategic capital movement by Indian firms in the global arena.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.