Foreign Direct Investment (FDI) stands as a key catalyst for India's economic growth, constituting a substantial non-debt financial reservoir for the nation's developmental endeavours. International corporations strategically invest in India, capitalizing on the country's unique investment incentives, including tax incentives and relatively competitive labour costs. This not only facilitates the acquisition of technological expertise but also fosters job creation and various ancillary advantages. The influx of these investments into India is a direct result of the government's proactive policy framework, a dynamic business environment, improving global competitiveness, and a burgeoning economic influence.
The Indian government has implemented a range of policies and initiatives to enhance Foreign Direct Investment (FDI) in the country. Notable efforts include the "Make in India" campaign, which focuses on simplifying procedures and promoting a favourable investment climate across sectors. Liberalization of FDI policies, particularly in retail, defence, insurance, and single-brand retail trading, has been a key strategy. The Goods and Services Tax (GST) implementation has improved transparency, while Special Economic Zones (SEZs) provide dedicated spaces with tax incentives.
India's Service sector, Computer software and hardware and Trading have been the major receivers of FDI. The total amount of EFDI inflows received during (April 2000-December 2024) was Rs. 61,57,738 crore (US$ 719.53 billion). This FDI has come from more than 170 countries that have invested across 33 UTs and States and 63 sectors in the country.
India has reached a significant milestone in its economic development, with gross Foreign Direct Investment (FDI) inflows totalling an impressive Rs. 86,87,000 crore (US$ 1 trillion) since April 2000. This achievement has been further strengthened by a nearly 26% increase in FDI, amounting to Rs. 3,65,723 crore (US$ 42.1 billion) during the first half of the FY25. Such growth underscores India's rising attractiveness as a global investment destination, fuelled by a proactive policy framework, a vibrant business environment, and enhanced international competitiveness.
India's FDI equity inflows for April-December 2024 surged by 27% to Rs. 3,40,962 crore (US$ 40.67 billion), with significant investments in services and non-conventional energy sectors.
India's FDI inflows have increased ~20 times from FY01 to FY24. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 89,85,900 crore (US$ 1.05 trillion) between April 2000-December 2024, mainly due to the government's efforts to improve the ease of doing business and easing of FDI norms.
The total FDI inflow into India from July 2024 to December 2024 stood at Rs. 161,746 crore (US$ 18.9 billion) and FDI equity inflow for the same period stood at Rs. 92,426 crore (US$ 10.8 billion).
From April 2000-December 2024, India's service sector attracted the highest FDI equity inflow of 16.2% amounting to Rs. 998,890 crore (US$ 116.72 billion), followed by the computer software and hardware industry at 15.0%, amounting to Rs. 927,687 crore (US$ 108.40 billion), trading at 6.4% amounting to Rs. 3,99,659 crore (US$ 46.7 billion), telecommunications at 5.5% amounting to Rs. 3,42,320 crore (US$ 40 billion), and automobile industry at 5.2% amounting to Rs. 3,20,925 crore (US$ 37.5 billion).
India also had major FDI inflows during April 2000-December 2024, coming from Mauritius at Rs. 15,30,256 crore (US$ 178.81 billion) with a total share of 24.8%, followed by Singapore at 23.8% with Rs. 1,471,291 crore (US$ 171.92 billion), the USA at 9.5% with Rs. 5,89,903 crore (US$ 68.93 billion), the Netherlands at 7.3% with Rs. 451,435 crore (US$ 52.75 billion), and Japan at 6% with Rs. 3,70,390 crore (US$ 43.28 billion).
The state that received the highest FDI equity inflow during October 2019-December 2024, was Maharashtra with Rs. 7,33,677 crore (US$ 85.73 billion) at 31%, followed by Karnataka with at 20% with Rs. 4,75,140 crore (US$ 55.52 billion), Gujarat at 16% with Rs. 3,83,056 crore (US$ 44.76 billion), Delhi at 13% with Rs. 309,457 crore (US$ 36.16 billion), and Tamil Nadu at 5% with Rs. 1,18,443 crore (US$ 13.84 billion).
India has become an attractive destination for FDI in recent years, influenced by several factors which have boosted FDI. In the Global Innovation Index (GII) 2024, India secured the 39th position among 133 global economies. This marks a significant improvement from its 81st rank in 2015, demonstrating India's commitment to fostering a robust innovation ecosystem that is underpinned by strong policies, investment in research and development (R&D), and a collaborative environment for startups and industries. These factors have boosted FDI investments in India. Some of the recent developments are as follows:
In recent years, India has become an attractive destination for FDI because of favourable government policies. India has developed various schemes and policies that have helped boost India's FDI. These schemes have prompted India's FDI investment, especially in upcoming sectors such as defence manufacturing, real estate, and research and development. Some of the major government initiatives are:
India has become a major global hub for FDIs. According to World Investment Report 2023, India was among the top 10 global FDI destinations. In the recent past, India has provided huge corporate tax cuts and simplified labour laws. Additionally, India has remained an attractive market for international investors in terms of short- and long-term prospects. India's cost-efficient manufacturing sector is one of the most promising sectors to attract FDI. Over the past decade, India has also developed excellent government efficiency, leading to enhancement of FDI inflow in the country. Despite a slight dip in FY24, key sources of FDI like Singapore, Mauritius, and the US remain strong. As global uncertainties ease, FDI from various countries is expected to increase, driven by India’s robust growth prospects and favourable investment policies.