Foreign Direct Investment (FDI) stands as a key catalyst for India's economic growth, constituting a substantial non-debt financial reservoir for the nation's developmental endeavours. International corporations strategically invest in India, capitalizing on the country's unique investment incentives, including tax incentives and relatively competitive labour costs. This not only facilitates the acquisition of technological expertise but also fosters job creation and various ancillary advantages. The influx of these investments into India is a direct result of the government's proactive policy framework, a dynamic business environment, improving global competitiveness, and a burgeoning economic influence.
The Indian government has implemented a range of policies and initiatives to enhance Foreign Direct Investment (FDI) in the country. Notable efforts include the "Make in India" campaign, which focuses on simplifying procedures and promoting a favourable investment climate across sectors. Liberalization of FDI policies, particularly in retail, defence, insurance, and single-brand retail trading, has been a key strategy. The Goods and Services Tax (GST) implementation has improved transparency, while Special Economic Zones (SEZs) provide dedicated spaces with tax incentives.
India's Service sector, Computer software and hardware and Trading have been the major receivers of FDI. The total amount of EFDI inflows received during (April 2000-December 2024) was Rs. 61,57,738 crore (US$ 719.53 billion). This FDI has come from more than 170 countries that have invested across 33 UTs and States and 63 sectors in the country.
India has reached a significant milestone in its economic development, with gross Foreign Direct Investment (FDI) inflows totalling an impressive Rs. 86,87,000 crore (US$ 1 trillion) since April 2000. This achievement has been further strengthened by a nearly 26% increase in FDI, amounting to Rs. 3,65,723 crore (US$ 42.1 billion) during the first half of the FY25. Such growth underscores India's rising attractiveness as a global investment destination, fuelled by a proactive policy framework, a vibrant business environment, and enhanced international competitiveness.
India's FDI equity inflows for April-December 2024 surged by 27% to Rs. 3,40,962 crore (US$ 40.67 billion), with significant investments in services and non-conventional energy sectors.
Market Size
India's FDI inflows have increased ~20 times from FY01 to FY24. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 89,85,900 crore (US$ 1.05 trillion) between April 2000-December 2024, mainly due to the government's efforts to improve the ease of doing business and easing of FDI norms.
The total FDI inflow into India from July 2024 to December 2024 stood at Rs. 161,746 crore (US$ 18.9 billion) and FDI equity inflow for the same period stood at Rs. 92,426 crore (US$ 10.8 billion).
From April 2000-December 2024, India's service sector attracted the highest FDI equity inflow of 16.2% amounting to Rs. 998,890 crore (US$ 116.72 billion), followed by the computer software and hardware industry at 15.0%, amounting to Rs. 927,687 crore (US$ 108.40 billion), trading at 6.4% amounting to Rs. 3,99,659 crore (US$ 46.7 billion), telecommunications at 5.5% amounting to Rs. 3,42,320 crore (US$ 40 billion), and automobile industry at 5.2% amounting to Rs. 3,20,925 crore (US$ 37.5 billion).
India also had major FDI inflows during April 2000-December 2024, coming from Mauritius at Rs. 15,30,256 crore (US$ 178.81 billion) with a total share of 24.8%, followed by Singapore at 23.8% with Rs. 1,471,291 crore (US$ 171.92 billion), the USA at 9.5% with Rs. 5,89,903 crore (US$ 68.93 billion), the Netherlands at 7.3% with Rs. 451,435 crore (US$ 52.75 billion), and Japan at 6% with Rs. 3,70,390 crore (US$ 43.28 billion).
The state that received the highest FDI equity inflow during October 2019-December 2024, was Maharashtra with Rs. 7,33,677 crore (US$ 85.73 billion) at 31%, followed by Karnataka with at 20% with Rs. 4,75,140 crore (US$ 55.52 billion), Gujarat at 16% with Rs. 3,83,056 crore (US$ 44.76 billion), Delhi at 13% with Rs. 309,457 crore (US$ 36.16 billion), and Tamil Nadu at 5% with Rs. 1,18,443 crore (US$ 13.84 billion).
Investments/Developments
India has become an attractive destination for FDI in recent years, influenced by several factors which have boosted FDI. In the Global Innovation Index (GII) 2024, India secured the 39th position among 133 global economies. This marks a significant improvement from its 81st rank in 2015, demonstrating India's commitment to fostering a robust innovation ecosystem that is underpinned by strong policies, investment in research and development (R&D), and a collaborative environment for startups and industries. These factors have boosted FDI investments in India. Some of the recent developments are as follows:
According to S&P Global, India’s manufacturing sector is gaining global investor interest amid shifting trade dynamics. With resilient growth, supply-chain diversification, and competitiveness improvements, India is poised to boost manufacturing, attract FDI, and expand global export share.
Foreign Portfolio Investors (FPIs) made strong investments in the Indian equity markets in the second week of May 2025, bringing in Rs. 4,452.3 crore (US$ 519.58 million) between May 13 and May 16, according to data from the National Securities Depository Limited (NSDL).
India is considering allowing foreign investment in its nuclear energy sector. The government may permit up to 49% FDI in phases. Initial approval could be 26%, followed by a review. This move aims to boost nuclear energy production to 40 GW by 2035.
Foxconn is investing Rs. 12,894 crore (US$ 1.5 billion) to expand its Indian operations as Apple diversifies production away from China, aiming to mitigate geopolitical and tariff risks. This move follows Apple's plan to manufacture a majority of iPhones sold in the US in India.
Databricks plans to invest Rs. 2,133 crore (US$ 250 million) in India over 2027. The company is also planning to increase its headcount by over 50% to 750 by the end of the financial year, focusing on training, R&D, and go-to-market initiatives.
The Reserve Bank of India (RBI) in its April 2025 bulletin said India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages.
As per government officials, India has received over 20 foreign direct investment queries in the past two months following the United States’ recent tariff move, as companies across sectors such as chemicals, automobiles, textiles, and electronics are exploring manufacturing and investment options in India.
According to data from DPIIT, foreign direct equity investment experienced a significant increase of 45%, reaching Rs. 2,58,873 crore (US$ 29.8 billion) in H1 FY25. This rise in FDI equity inflows follows three consecutive years of contraction in investment inflows.
In FY24, hospitals in India garnered a substantial Rs. 12,708 crore (US$ 1.50 billion) in FDI, representing half of all healthcare FDI. This uptick from 24% in FY21 and 43% in FY20 highlights the increasing significance of hospitals in attracting foreign investments.
India's Executive Director at the IMF, Mr. K V Subramanian, expressed strong confidence in India's path to becoming a US$ 55 trillion economy by 2047, as outlined in his new book *India@100: Envisioning Tomorrow's Economic Powerhouse*.
Maharashtra government has set an ambitious target to double the state’s GDP to US$ 1 trillion (Rs. 84,73,000 crore) by the end of this decade. This would position Maharashtra’s GDP higher than that of countries such as Singapore, Switzerland, and the UAE. To reach this goal, the government aims for a compound annual growth rate (CAGR) of 14%, boosting the GDP from US$ 500 billion (Rs. 42,36,500 crore) to US$ 1 trillion (Rs. 84,73,000 crore).
Net FDI in India has shown significant growth, more than doubling from US$ 3.26 billion in April 2024 to US$ 6.62 in August 2024.
Taiwanese companies are progressively shifting their supply chains from China to India amidst rising global trade tensions, strengthening economic connections between Taipei and New Delhi. Chairman of the Taiwan External Trade Development Council, Mr. James Huang, emphasized a notable increase in Taiwan's for FDI in India, surpassing US$ 665 million in the 5 years leading up to 2023, in contrast to the approximately US$ 277 million invested between 2006 and 2017.
As of April 17, 2024, the Ministry of Finance's notification on Foreign Direct Investment (FDI) in the Space sector signifies a pivotal advancement, offering Indian space startups expanded avenues to global capital. This development underscores a commitment to fostering growth, innovation, and alignment with international benchmarks within the space industry.
India aims to attract at least US$ 100 billion annually in gross foreign direct investment (FDI), reflecting a significant increase from the previous average of over US$ 70 billion in the last five years through March 2023; despite a dip in FDI last year due to global uncertainties, the country anticipates achieving the US$ 100 billion target for the current fiscal year, with a positive and upward trend projected over the next five years, suggesting the need for continued reforms and policies to enhance investment attractiveness and stimulate growth across sectors.
Over the past 9 years, the Indian insurance sector has attracted approximately Rs 54,000 crore (US$ 6.48 billion) in foreign direct investment (FDI), with significant increases in FDI limits and a rise in the number of insurance players, contributing to enhanced insurance penetration and density in the country.
As of March 05, 2024, the Ministry of Commerce & Industry in India has reviewed the Foreign Direct Investment (FDI) Policy regarding the space sector, implementing changes in sectoral caps and entry routes for various activities within the sector, effective from the date of FEMA notification, and subject to sectoral guidelines issued by the Department of Space.
The amendment in the Foreign Direct Investment (FDI) policy for the space sector, approved by the Union Cabinet under Prime Minister Mr. Narendra Modi, it divides the satellites sub-sector into three activities with specified foreign investment limits. It also permits 100% FDI to attract investors to Indian space companies through enhanced entry routes.
As of February 9, 2024, companies in the defence sector have disclosed FDI valued at US$ 612 million (Rs. 5,077 crore). The government further encourages FDI by fostering collaboration on specialized defence technologies with foreign OEMs.
The IT minister of India Mr. Ashwini Vaishnaw announced on 17th January 2024, that the country aims to achieve US$ 100 billion in annual Foreign direct investment (FDI) in the coming years, they anticipate a consistent growth rate of 6-8% over the next decade, underpinned by a meticulously devised strategy consisting of four major components.
Financial Services Secretary Mr. Vivek Joshi stated in March 2024, that the insurance sector has attracted approximately US$ 6.51 billion (Rs. 54,000 crore) in foreign direct investment (FDI) over the past nine years due to the government's continued liberalization of overseas capital flow regulations. He mentioned government raised the allowable FDI cap from 26% in 2014 to 49% in 2015, and subsequently to 74% in 2021.
The Ministry of Food Processing Industries Organised World Food India-2023 in New Delhi in November 2023. The event saw investment interests and MoUs totalling US$ 4 billion (Rs. 33,129 crore). To bolster the food processing sector, the Ministry promotes investment through schemes like PMKSY, PLISFPI, and PMFME, which has resulted in an estimated investment leverage of over US$ 3.12 billion (Rs. 25,869 crore).
NTPC Green Energy Limited (NGEL) signed a Memorandum of Understanding (MoU) with the Government of Maharashtra to collaborate on the development of Green Hydrogen and its derivatives, along with Pumped Storage Projects and renewable energy projects. This partnership, aligned with the state's Green Investment Plan for the next five years, anticipates an investment of around US$ 9.65 billion (Rs. 80,000 crores).
The renewable energy sector received a total FDI equity investment of US$ 6.14 billion from April 2020 till September 2023, per the data from the Department for Promotion of Industry and Internal Trade (DPIIT). According to the existing FDI policy, up to 100% investment is permitted in the sector via the automatic route.
Union Minister Dr. Jitendra Singh announced that India has attracted over US$ 120 million (Rs. 1,000 crore) in investments in space startups within the first nine months of FY24, owing to the opening up of the space sector for private players by Prime Minister Mr. Narendra Modi. The sector has also witnessed a surge from one startup to nearly 190 in four years.
Karnataka has sealed eight MoUs valued at US$ 2.76 billion (Rs 23,000 crore) with global giants, showcasing a robust economic stride. Key agreements include Web Werks' US$ 2.4 billion (Rs 20,000) crore investment in a hyper-scale data centre and Microsoft's commitment to digital skilling initiatives. Hitachi aims to stimulate economic growth in rural areas. Additionally, MoUs worth US$ 360.97 million (Rs 3000 crore) span digital healthcare, smart city infrastructure, renewable energy, and data centres. Companies, including Lulu Group and BL Agro, are set to establish facilities in north Karnataka, promoting equitable development. AI, sustainability, and citizen services emerged as focal points, signalling Karnataka's prowess in attracting diverse industries.
In January 2024, DP World has sealed agreements worth US$ 3.0 billion (Rs 25,000 crore) with the Gujarat government during the Vibrant Gujarat Global Summit 2024. DP World Group Chairman and CEO, H.E. Sultan Ahmed bin Sulayem, inked these MoUs with Additional Chief Secretary of Ports and Transport Department Mr. M K Das, in the presence of Prime Minister Mr. Narendra Modi and President of the United Arab Emirates Mr. Sheikh Mohamed bin Zayed Al Nahyan. The deals focus on developing deep-draft ports, economic zones, and Special Economic Zones in south Gujarat and along the western coast. DP World's commitment includes investments in Gati Shakti Cargo Terminals and Private Freight Stations at various locations in Gujarat.
In January 2024, Prime Minister Mr. Narendra Modi inaugurated Boeing's cutting-edge US$ 192.51 million (Rs 1,600 crore) Engineering and Technology Centre near Bengaluru. Spanning 43 acres, it marks Boeing's largest investment outside the US. Located in Devanahalli, the campus is set to foster collaborations with startups, private entities, and the government, driving next-gen aerospace and defence solutions globally. The new campus aligns with Boeing's global engineering expansion, featuring future avionics manufacturing and assembly capabilities.
Hyundai Motors has successfully acquired General Motors India's Talegaon plant in Maharashtra and announced a substantial investment of US$ 721.94 million (Rs 6000 crore) in the state. The agreement, finalized at the World Economic Forum in Davos, signifies Hyundai Motors' commitment to expanding its manufacturing capacity in India. The Talegaon plant, with an annual capacity of 130,000 units, is set to resume operations in 2025. Hyundai Motors plans phased investments to upgrade infrastructure and equipment, aligning with global standards, aiming to achieve a one-million-unit annual production capacity, and further solidifying its position in the Indian market.
In 2024, Mercedes-Benz plans a US$ 24.03 million (Rs. 200 crore) investment in India, unveiling over 12 vehicles, including three electric models. Nearly half will be in the top-end vehicle segment, with prices starting at US$ 1,80,201 (Rs 1.5 crore). The move reflects the luxury carmaker's commitment to expanding its presence and embracing the growing electric vehicle market in India.
In October 2023, Reliance Retail Ventures Limited (RRVL) announced that a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest Rs. 4,966.80 crore (US$ 596.63 million) into the company.
In September 2023, Hindalco signed a technology partnership with Italy-based, Metra SpA, to bring the latest aluminium extrusion technology to India for building rail coaches.
In September 2023, US chipmaker, Nvidia Corporation announced separate partnerships with Reliance and Tata group companies to help them develop AI-powered supercomputers, AI clouds and generative AI applications.
In September 2023, Singapore's investment firm, Temasek led US$ 140 million Ola Electric funding at a US$ 5.4 billion valuation.
In August 2023, Qatar Investment Authority (QIA) invested Rs. 8,278 crore (US$ 994.39 million) in Reliance Retail Ventures Limited (RRVL) to get an equity stake of 0.99%.
In August 2023, the global investment firm Temasek invested Rs. 1,200 crore (US$ 144,15 million) in its electric vehicle subsidiary Mahindra Electric Automobile Ltd (MAEL).
In August 2023, Brookfield Asset Management entered into an agreement with Reliance Industries (RIL) to invest US$ 20-30 billion over the next decade in Australia's renewable energy sector.
In August 2023, Walmart paid US$ 1.4 billion to buy out hedge fund Tiger Global's stake in Flipkart.
In July 2023, Jio Financial partnered with BlackRock to launch an asset management firm with a combined investment of US$ 300 million.
In July 2023, U.S.-based investment firm, Bain Capital announced that it has entered into an agreement to acquire 90% of Adani Capital and Adani Housing.
In July 2023, Walt Disney is considering options for its Star India business, including a joint venture or sale, as it looks to help the India business grow and reduce costs.
In July 2023, French advertising and public relations company Havas’s India arm announced the acquisition of Pivot Roots.
In June 2023, All cargo Logistics completed the acquisition of a 30% stake in Gati-Kintetsu Express (GKEPL) for Rs. 406.71 crore (US$ 49.48 million).
In June 2023, BPEA EQT group (formerly Baring Private Equity Asia), in partnership with ChrysCapital, is set to acquire around 90% stake in Housing Development Finance Corporation's wholly owned education financial subsidiary HDFC Credila Financial Services Ltd (HDFC Cedilla) for Rs. 9,060.5 crore (US$ 1.10 billion).
In June 2023, Private equity (PE) investors Blackstone Inc., BPEA EQT ((formerly Baring Private Equity Asia), CVC Capital Partners, and General Atlantic Service Company are competing to acquire Mumbai-based Indira IVF Hospital Pvt. Ltd.
In April 2023, Sheares Healthcare, a subsidiary of Singapore-based Temasek, agreed to purchase a majority position in Manipal Health Enterprises, increasing its holding from 18% to nearly 59% for around Rs. 16,400 crore (US$ 2 billion).
In February 2023, Singapore Airlines acquired a 25.1% share in the Air India group after investing US$ 267 million.
VilCart, the rural economy-focused technology startup bagged US$ 18 million in January 2023 from Asia Impact SA, Nabventures Fund and Texterity Pvt Ltd to expand their operations.
Government Initiatives
In recent years, India has become an attractive destination for FDI because of favourable government policies. India has developed various schemes and policies that have helped boost India's FDI. These schemes have prompted India's FDI investment, especially in upcoming sectors such as defence manufacturing, real estate, and research and development. Some of the major government initiatives are:
As part of the Union Budget 2025-26, the government has raised the sectoral cap for the insurance sector from 74% to 100%. Additionally, an Investment Friendliness Index for states will be introduced this year. The government is also set to launch Jan Vishwas 2.0 to enhance the business environment further.
Government permits 100% Foreign Direct Investment via automatic route for Aircraft Maintenance, Repair and Overhaul (MRO).
The government is taking steps such as facilitating foreign direct investments, nudge prioritisation, and promoting opportunities for using Indian rupee as a currency for overseas investments to simplify FDI regulations and to speed up the approval process.
In Union Budget 2024-25, a proposal has been made to support foreign shipping companies operating domestic cruises, recognizing the significant potential of cruise tourism. Additionally, foreign mining companies selling raw diamonds in the country will now be able to take advantage of safe harbour rates, which will benefit the diamond industry. Furthermore, the corporate tax rate for foreign companies has been reduced from 40% to 35% to attract foreign investment.
The Union Cabinet approved the signing and ratification of a Bilateral Investment Treaty between India and the United Arab Emirates aiming to boost investor confidence, attract foreign investments, and create opportunities for overseas direct investment, potentially leading to job creation. Additionally, it is anticipated to stimulate investments in India, aligning with the vision of ‘Atmanirbhar Bharat’ by promoting domestic manufacturing, reducing import reliance, and boosting exports.
The Union Cabinet approved an amendment to the Foreign Direct Investment (FDI) policy concerning the Space Sector, aligning with the vision of ‘Atmanirbhar Bharat’ outlined by Prime Minister Mr. Narendra Modi. This amendment liberalised the Space sector, allowing 100% foreign direct investment in specified sub-sectors/activities. The reform is expected to improve the Ease of Doing Business in India, attract greater FDI inflows, and stimulate investment, income, and employment growth.
In line with the 'Atmanirbhar Bharat' vision, the Union Cabinet approved the PLI Scheme for White Goods (Air Conditioners and LED lights) with a budget of US$ 752 million (Rs. 6,238 crore) from FY 2021-22 to FY 2028-29. The scheme has approved 64 applicants, with a total committed investment of US$ 816 million (Rs. 6,766 crore).
FDI equity inflows in India's manufacturing sector has seen significant growth, particularly over the last decade. The government reports indicate a 69% increase in FDI equity inflows in the manufacturing sector from Rs. 8,37,191 crore (US$ 97.7 billion) during 2004-14 to Rs. 14,14,742 crore (US$ 165.1 billion) during 2014-24. This growth is attributed to various factors, including the Make in India initiative, Production-Linked Incentive (PLI) scheme, and India's overall economic growth.
The Reserve Bank of India has taken several actions to increase foreign exchange inflows. These actions consist of:
Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current interest rate regulations until the end of October 2022.
Inclusion of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route (FAR) for FPls.
Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made until October 31st, 2022.
Permitting FPI in commercial paper and non-convertible debentures with an original maturity of up to one year.
A temporary increase in the limit for external commercial borrowings (ECBs) under the automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.
Increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower having an investment grade rating.
Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund foreign currency loans to organisations for a variety of end uses other than exports.
The Government of India increased FDI in the defence sector by liberalizing it to 74% through the automatic route and 100% through the government route.
The Foreign Investment Facilitation Portal (FIFP) is a new online single-point interface of the government for investors to facilitate Foreign Direct Investment proposals to evaluate and further authorise them under the Government approval route.
The sectoral cap for the pharmaceutical industry has been lowered, 74% of FDI is permitted in the Brownfield pharma sector via the automatic method, and 100% is permitted via the approved route.
In the civil aviation sector, 100% FDI is allowed under automatic routes in brownfield airport projects.
For single-brand retail trading, local sourcing norms have been relaxed for up to 3 years and 100% FDI is allowed under automatic route.
The government has amended the Foreign Exchange Management Act (FEMA) rules, allowing up to 20% FDI in insurance company LIC through the automatic route.
Many reforms like National Technical Textiles, Silk Samagra-2 scheme, Seven PradhanMantri Mega Integrated Textile Region and Apparel (PM MITRA) Parks, Production Linked Incentive (PLI) Scheme for Textiles to promote the production of Man-Made Fibre (MMF) Apparel, MMF Fabrics and Products of Technical Textiles, and more initiatives are taken by the government to enhance export and to promote FDI in the textile sector.
Road ahead
India has become a major global hub for FDIs. According to World Investment Report 2023, India was among the top 10 global FDI destinations. In the recent past, India has provided huge corporate tax cuts and simplified labour laws. Additionally, India has remained an attractive market for international investors in terms of short- and long-term prospects. India's cost-efficient manufacturing sector is one of the most promising sectors to attract FDI. Over the past decade, India has also developed excellent government efficiency, leading to enhancement of FDI inflow in the country. Despite a slight dip in FY24, key sources of FDI like Singapore, Mauritius, and the US remain strong. As global uncertainties ease, FDI from various countries is expected to increase, driven by India’s robust growth prospects and favourable investment policies.
