Inside the Changing Winds of Foreign Capital Flows

The current slump in FDI is a global phenomenon. But, for India, the stakes are higher

- howindialives.com

In December 2024, the ministry of commerce, in a public statement, noted what it called a "remarkable milestone" in the country's "economic journey," with total inflows of foreign direct investment (FDI) hitting a cumulative amount of $1 trillion since 2000. "Such growth reflects India's growing appeal as a global investment destination, driven by a proactive policy framework, a dynamic business environment, and increasing international competitiveness," the ministry said in its press release.

On the face of it, there was indeed cause for celebration. So-called 'gross' flows—what the government was highlighting—amounted to $81 billion in 2024-25, up over $10 billion from a year earlier, and the third highest annual inflow ever into India. According to the central bank, globally, India ranked fourth in terms of greenfield FDI (new projects) capital investments announced during 2024-25, following the US, UK and France.

But gross flows account only for the FDI that flows into the country. It doesn't take into account the funds that flow out due to foreign companies repatriating funds back to their head offices overseas, or foreign investors selling off investments in Indian companies, or Indian companies investing in ventures overseas. Add all that back in, and net flows, after accounting for the outward movement of funds, collapsed to just around $400 million in 2024-25, from over $10 billion a year earlier (see chart).

Put differently, a sea change in India's FDI landscape in the last few years has been the extent to which funds have moved out of the country rather than into it.