Net FDI slumps 96% in FY25 to $353 mn

Syllabus: GS3/Economy

Context

• As per the RBI, the Net foreign direct investment (FDI) into India crashed by more than 96% to just $353 million in 2024-25 as compared to the previous year. 

About

• The net FDI figure stood at $44 billion in 2020-21, it fell to $10.1 billion in 2023-24, and finally to just $353 million ($0.4 billion) in 2024-25.
• While gross FDI inflows are healthy and diversified, net FDI is falling due to:
  • Higher repatriation by foreign companies (profit-taking, divestment).
  • Increasing outward investment by Indian companies (global expansion).
  • In 2024-25, Indian companies invested a total of $29.2 billion in other countries, 75% higher than the previous year.
• Gross Inflows: Gross FDI remained elevated in FY25, with 13.7%  year-on-year (Y-o-Y) growth to clock $81 billion worth of flows.
  • More than 60% of gross FDI inflows in FY25 were in manufacturing, financial services, electricity and other energy, and communication services sectors. 
  • Singapore, Mauritius, the UAE, the Netherlands, and the United States (US) accounted for more than 75% of the flows.

Net Foreign Direct Investment

• Net FDI is gross FDI, which is the total money coming in, minus the money being repatriated out by foreign companies doing business in India and the outward FDI by Indian companies.
  • Net FDI = Gross FDI Inflows − (Repatriation by foreign firms + Outward FDI by Indian firms).
• Key Components:
  • Gross FDI Inflows: Total new investments made by foreign entities into the country. It includes setting up factories, acquiring local companies, or expanding operations.
  • Repatriation & Disinvestment: Profits or capital that foreign companies send back to their home countries. Includes sale of assets or shares in domestic firms.
  •  Outward FDI: Investments made by domestic companies in foreign countries (e.g., acquisitions, setting up subsidiaries).

Why Net FDI Matters? 

• Positive Net FDI: Indicates more foreign investment is coming in than going out, often seen as a sign of economic attractiveness.
• Low or Negative Net FDI: May suggest capital is being withdrawn or domestic firms are investing more abroad than foreigners are investing locally.
  • Not always negative but it may reflect economic maturity or global ambition.

Source: TH