Manya Rathore
Research expert covering India
Foreign direct investments in India - statistics & facts
While India is one of the fastest-growing economies in the world, it has also emerged as one of the top destinations for foreign direct investments. A large consumer base, growing disposable incomes, and expanding digital infrastructure are some of the key drivers in the evolving global preference for investing in India. Indeed, foreign direct investments are an essential driver of a country’s economy since they boost the job market, and technical knowledge base and provide non-debt financial resources.
FDI regulatory framework
Over the years, successive governments in India have understood the potential of overseas investments and liberalized FDI policies. There are two routes to making foreign direct investment in India. The automatic route allows investments without needing any approval or license from the government. These sectors include air transport, healthcare, IT and BPM, manufacturing, and financial services. The sectors that require prior government approval fall under the government approval route including banking and the public sector, food products retail trading, print media, satellite, and others. The amount of investment depends on the sector, however, over the years, the government has allowed 100 percent FDI in various sectors. There are currently nine sectors in which FDI is prohibited, including lottery, gambling, chit funds, real estate business, and cigarettes.Singapore is emerging as a hub for inbound and outbound FDI
In a parallel trend, Indian firms continued overseas investments. The Outward Direct Investment shows India’s ability to expand beyond its borders and establish a direct presence in foreign markets. While Singapore retained the spot as India’s largest FDI source for the seventh straight fiscal year, it was also the leading recipient of Indian outward direct investment. The Double Tax Avoidance Agreement between the two nations helps Singapore-based organizations to invest in India and reduce the total tax burden on income earned in India. Interestingly, it is also India’s leading overseas investment destination. The country serves as an intermediate financial hub, as companies first remit funds to Singapore before transferring them to their financial investment destinations, leveraging its favorable tax treaties with other nations.What’s behind the drop in net FDI?
Although the gross foreign direct investment inflows to India were valued at nearly 81 billion U.S. dollars in the financial year 2025, a robust growth of over 13 percent. It remained concentrated in services, computers, and trading sectors. Despite a strong rise in gross FDI, the net FDI plummeted by over 96 percent, standing at around 400 million U.S. dollars. The significant drop is attributed to the repatriation of profits by foreign companies and the outward FDI from India. Some experts find the development concerning, while others consider this a sign of market maturity, which shows the ability to attract, retain, and smoothly exit capital.Manya Rathore
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Jul 21, 2025
Manya Rathore
Research expert covering India
