A new wave of FDI could help the country stare down uncertainty

India-bound investments in future-focused sectors could favour faster economic growth amid shifting geopolitical dynamics

- RAJAT DHAWAN, SHIVANSHU GUPTA & JEONGMIN SEONG

Foreign direct investment (FDI) has a long history of transforming industries—from steel to semiconductors.

This has been true in countries such as China, Japan, South Korea, Vietnam and India. But there's an FDI shakeup underway, according to a new study from the McKinsey Global Institute (MGI). As investment decisions increasingly follow geopolitical lines, India stands as the world's top emerging-market destination for announced ‘greenfield’ FDI—that is, cross-border investment projects that create net new production capacity. From 2022 through the first five months of 2025, India’s greenfield FDI inflow announcements have averaged $83 billion a year—24% higher than in the 2015 to 2019 period.

Of those billions pledged to India since 2022, nearly 80% were destined for advanced manufacturing, communications and software, and resource-related sectors—industries poised to shape tomorrow's global economy. These are neither the conventional textile nor basic product investments that played large roles in years past. While India’s large and growing domestic market continues to pull in foreign investors, it is far from the only factor in play in the post-pandemic years.

FDI as a sign of India's promise as a hub for future-shaping industries: The MGI study analysed about 200,000 announced greenfield FDI deals over the past decade. The analysis indicated that large corporations are increasingly making multi-billion-dollar bets on future-shaping industries and linking more geopolitically aligned economies in the process. Amid this global shakeup, signals were mixed for emerging economies, especially for those that may have grown dependent on foreign inflows to prop up economic growth.