India Attracts Over $4.5 Billion in Monthly FDI Despite Global Challenges

India has seen impressive foreign direct investment (FDI) inflows, averaging over USD 4.5 billion per month since January 2024, despite global uncertainties. The country is poised to sustain this momentum in 2025, driven by strategic policies implemented by Prime Minister Narendra Modi’s government to enhance India’s investor-friendly environment.

Key measures like investor-friendly policies, strong returns on investments, skilled manpower, reduced compliance burdens, and the decriminalisation of minor industry-related offences have kept India an attractive destination for foreign investors. Additionally, initiatives such as the national single window system for streamlined approvals, clearances, and production-linked incentive (PLI) schemes have contributed to the country’s growing appeal.

India's FDI policy is continually reviewed and updated based on consultations with stakeholders including industry chambers and associations. This proactive approach ensures that India remains a leading choice for global investors. Between January and September 2024, FDI inflows surged by 42% to USD 42.13 billion, up from USD 29.73 billion during the same period in 2023. During the April-September 2024 period, FDI grew by 45% to USD 29.79 billion compared to USD 20.48 billion last year. India’s total FDI inflows in 2023-24 stood at a robust USD 71.28 billion.

Amardeep Singh Bhatia, Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), expressed confidence that India will continue attracting substantial FDI in 2025. He emphasized that the country is constantly opening up its economy to global investors by raising foreign investment limits, removing regulatory barriers, and developing infrastructure.

India's manufacturing sector has also seen impressive growth in FDI, with a 69% increase in equity inflows from USD 98 billion in 2004-2014 to USD 165 billion in 2014-2024. The country’s success is reflected in the rise of over 100 unicorns and the expansion of companies like BYJU’S, Zomato, Ola, and Nykaa, which have scaled operations globally. The success of Indian-origin startups in Silicon Valley further underscores the country’s global economic influence.

Despite the global challenges, India remains a preferred investment destination, and experts believe further improvements could help attract even more foreign capital. Some of the suggested steps include enhancing ease of doing business, liberalizing sectoral caps in industries like pharmaceuticals and broadcasting, and simplifying the approval processes for countries sharing land borders with India, such as China.

Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, proposed a more transparent system for processing FDI applications from border-sharing countries, including a time-bound process to boost investor confidence. Experts also called for the establishment of fast-track courts and arbitration centers to resolve corporate disputes swiftly.

India’s positioning in the global “China Plus One” strategy has seen limited success, with countries like Vietnam, Thailand, and Malaysia emerging as larger beneficiaries. However, India still stands out as a prime destination for companies looking to shift their manufacturing bases out of China, a trend that is expected to strengthen India’s domestic manufacturing capabilities, particularly in high-tech industries.

FDI inflows into India have crossed the USD one trillion mark from April 2000 to September 2024, with the cumulative FDI standing at USD 1,033.40 billion during this period. The major contributors to this inflow include Mauritius (25%), Singapore (24%), and the United States (10%).

Key sectors attracting FDI include services, computer software and hardware, telecommunications, trading, construction, automobile, chemicals, and pharmaceuticals. FDI is largely allowed through the automatic route, except in sectors like telecom, media, pharmaceuticals, and insurance, where government approval is required.