{"id":49109,"date":"2025-07-24T21:02:53","date_gmt":"2025-07-24T15:32:53","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=49109"},"modified":"2025-08-01T17:57:15","modified_gmt":"2025-08-01T12:27:15","slug":"drop-in-net-foreign-direct-investment","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/24-07-2025\/drop-in-net-foreign-direct-investment","title":{"rendered":"Drop in Net Foreign Direct Investment (FDI)\u00a0"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>In News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Net FDI inflows in India dropped by 98.2% to about $40 million in May 2025, compared to $2.2 billion in May 2024.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons for Decline<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Increased repatriation and divestment by foreign investors.<\/li>\n\n\n\n<li>Higher outward FDI by Indian companies.<\/li>\n\n\n\n<li>Gross FDI inflows also dipped somewhat to $7.2 billion from $8.1 billion year-on-year.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is Net FDI?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Net <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/21-05-2022\/the-foreign-direct-investment-fdi\">Foreign Direct Investment (<strong>FDI<\/strong>)<\/a> refers to the difference <strong>between gross FDI inflows <\/strong>into a country and the outflows due to repatriation of profits, divestment, or outward FDI from that country.\u00a0<\/li>\n\n\n\n<li>It essentially represents the net addition of foreign capital into the domestic economy after accounting for foreign capital leaving the country.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Source of FDI for India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Major Sources: <\/strong>Singapore, Mauritius, UAE, and the US together accounted for over 75% of FDI inflows in May 2025.<\/li>\n\n\n\n<li><strong>Top Sectors:<\/strong> Manufacturing, financial services, and computer services dominated FDI absorption.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Implications of Net FDI Decline<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Short-Term Impact: <\/strong>Sharp drops in net FDI can create temporary pressure on the balance of payments and external finances.<\/li>\n\n\n\n<li><strong>Economic Confidence<\/strong>: Despite the net dip, gross inflows remain solid, showing sustained investor confidence in India\u2019s growth prospects.<\/li>\n\n\n\n<li><strong>Sectoral Effects:<\/strong> Sectors dependent on foreign investments see short-term liquidity or expansion challenges if outflows persist.<\/li>\n\n\n\n<li><strong>Market Maturity:<\/strong> RBI suggests the rising repatriation signals a &#8220;mature market&#8221; where foreign investors have liquidity flexibility to enter and exit smoothly.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Types of Foreign Direct Investment<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Horizontal FD<\/strong><strong>I:<\/strong> The foreign investor replicates the same business operations in another country. <strong>Exampl<\/strong><strong>e:<\/strong> McDonald\u2019s or Toyota setting up restaurants\/factories in India.<\/li>\n\n\n\n<li><strong>Vertical FDI:<\/strong> Investor expands into a different stage of production (not the same product). For example: Investing in distribution or sales&nbsp; (a U.S. oil company investing in a chain of fuel stations in India).<\/li>\n\n\n\n<li><strong>Conglomerate FDI: <\/strong>Investor ventures into an unrelated business in the foreign country. <strong>For example: <\/strong>A manufacturing firm investing in banking abroad.<\/li>\n\n\n\n<li><strong>Greenfield FDI:<\/strong> Building a new factory in India by a foreign firm.<\/li>\n\n\n\n<li><strong>Brownfield FDI:<\/strong> Investment in existing facilities overseas. For example: Buying and upgrading an existing plant or unit abroad.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: BS<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>In News<\/strong><\/h3>\n<li class=\"ms-5\">Net FDI inflows in India dropped by 98.2% to about $40 million in May 2025, compared to $2.2 billion in May 2024.<\/li>\n<p><\/p>\n<h3><strong>Reasons for Decline<\/strong><\/h3>\n<li class=\"ms-5\">Increased repatriation and divestment by foreign investors.<\/li>\n<li class=\"ms-5\">Higher outward FDI by Indian companies.<\/li>\n<li class=\"ms-5\">Gross FDI inflows also dipped somewhat to $7.2 billion from $8.1 billion year-on-year.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/24-07-2025\/drop-in-net-foreign-direct-investment\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-49109","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/49109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=49109"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/49109\/revisions"}],"predecessor-version":[{"id":50064,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/49109\/revisions\/50064"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=49109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=49109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=49109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}