India’s changing FDI story

In the last couple of months, we have seen large foreign direct investment (FDI) commitments into India by United States (US) technology giants in the artificial intelligence (AI) infrastructure domain.

- RAJANI SINHA & SARBARTHO MUKHERJEE

This has brought to the fore India's attractiveness as an FDI destination, especially for new-age sectors. In recent years, India has witnessed healthy gross FDI inflows across manufacturing and services. However, this has been accompanied by a sharp increase in the repatriation of profits and FDI outflows from India, resulting in a narrowing of net FDI flows.Over the last five years, India's annual gross FDI inflows hovered between $70 and $85 billion, recording a compound annual growth rate of only around 2 per cent. However, the momentum has picked up, with gross FDI inflows surging by 18 per cent in FY25 and by 16 per cent in H1 FY26. Large domestic market, abundant skilled workforce, and steady economic growth have positioned India as an attractive investment destination among emerging markets. India has witnessed strong FDI in sectors such as semiconductors, electronics and electrical equipment, electric vehicle (EV) components, basic metals, and digital industries such as Cloud services and data centres.