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.