India's net foreign direct investment fell to $1 billion in FY25, down from $10.2 billion previously. While net inflows dropped due to higher overseas investment by Indian firms and exits by foreign investors, gross inflows reached a record $94.84 billion. This trend reflects both the global expansion of Indian companies and a maturing domestic investment landscape.
India witnessed a sharp contraction in net foreign direct investment (FDI) during the 2024-25 fiscal year, with inflows falling to $1 billion. This represents a steep decline from the $10.2 billion recorded in FY 2023-24 and is significantly lower than the $28 billion observed in FY 2022-23. The government has clarified that this decline is not a sign of waning interest, but rather the result of two specific trends: Indian companies increasing their own investments abroad and foreign investors exiting mature stakes.
Expanding Global Footprint of Indian Firms
Recent government data indicates that Indian businesses are increasingly looking beyond domestic borders. This outward direct investment (ODI) is largely driven by strategic acquisitions, efforts to secure new markets, and access to international technology. According to the Ministry of Commerce and Industry, this shift demonstrates the growing maturity and global ambition of Indian corporations as they integrate more deeply into global supply chains.
Foreign Investor Activity and Market Maturity
Another major factor contributing to the lower net FDI figure is the repatriation of funds by foreign investors. In many cases, these entities are monetizing investments made years ago after helping their Indian portfolio companies reach maturity. The transfer of ownership from these foreign players to domestic investors is being viewed by analysts as a sign of a deepening domestic capital base and the rising strength of local institutional and individual investment power.
Resilience in Gross FDI and Export Growth
While the net figure has declined, the overall flow of capital into the country remains robust. Gross FDI inflows for FY 2025-26 reached $94.84 billion, marking a 17% increase compared to the $80.62 billion recorded in the previous fiscal year. This gross figure, which highlights the total capital coming into the country before adjusting for outflows, suggests that India remains a major destination for global capital.
Simultaneously, India's export sector has shown consistent performance. Exports from Special Economic Zones (SEZs) rose by 11.8% year-on-year to reach ₹16.36 lakh crore in FY 2025-26. Gujarat continues to lead in SEZ exports with ₹4.05 lakh crore, followed by Karnataka, Maharashtra, and Tamil Nadu. Furthermore, the pharmaceutical sector has demonstrated long-term growth, with exports reaching $31.12 billion in FY 2025-26, more than double the $15.43 billion recorded in FY 2014-15. As the government works on further improving SEZ efficiency, investors may monitor whether these high gross FDI levels continue to translate into long-term domestic infrastructure and industrial development.