FDI inflows matched by outflows: Blip or worry?

India's large gross intake of foreign direct investment masks a sharp drop in net inflows. Was 2024-25 an aberrative year or must India turn more attractive as an FDI-worthy market?

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At first glance, India's latest foreign direct investment (FDI) data is impressive. The overseas money invested in our economy for long-horizon returns, always preferable to 'hot money' going into liquid assets, climbed 14% to $81 billion in 2024-25. This, however, was on a gross basis; it counts all FDI inflows last year. But after accounting for money repatriated out of India and all outward FDI, the numbers present a sobering picture. Net FDI stood at a measly $350 million, a 96% drop from 2023-24. In other words, our inflows of long-term capital were almost fully offset by outflows. Is this a blip or a sign of trouble? An answer demands patience, as any trend needs the figures of at least three years to plot. But even if 2024-25 turns out to be aberrative and net FDI rises again, policymakers would do well to keep the lost gap under watch. But first, let us look at inward investments. Manufacturing attracted about $19 billion last year, a large chunk of the total, rising 18%. In the context of India's policy emphasis on this sector, th