Foreign Direct Investment (FDI)

Overview

Last updated: Dec, 2025

Introduction

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-June 2025) was Rs. 49,28,358 crore (US$ 747.51 billion). This FDI has come from more than 170 countries that have invested across 33 states and UTs 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 13% increase in FDI compared to FY24, amounting to Rs. 4,41,259 crore (US$ 50 billion) during 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 FY26 (April-June 2025) surged by 13% to Rs. 1,59,428 crore (US$ 18.62 billion), with significant investments in services and computer software & hardware sectors.

Market Size

India's FDI inflows have increased ~20 times from FY01 to FY25. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 96,78,528 crore (US$ 1.09 trillion) between April 2000-June 2025, 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 April-June 2025 stood at Rs. 2,22,120 crore (US$ 25.2 billion) and FDI equity inflow for the same period stood at Rs. 1,59,428 crore (US$ 18.6 billion).

From April 2000-June 2025, India's service sector attracted the highest FDI equity inflow of 16% amounting to Rs. 7,93,783 crore (US$ 122.12 billion), followed by the computer software and hardware industry at 16%, amounting to Rs. 8,31,772 crore (US$ 116.15 billion), trading at 6% amounting to Rs. 3,38,826 crore (US$ 48.07 billion), telecommunications at

Bar graph depicting growth in India's FDI market size over the years

Source: Department for Promotion of Industry and Internal Trade (DPIIT), *- (April-June 2025)

5% amounting to Rs. 2,41,299 crore (US$ 40.09 billion), and automobile industry at 5% amounting to Rs. 2,59,753 crore (US$ 39.14 billion).

India also had major FDI inflows during April 2000-June 2025, coming from Mauritius at Rs. 11,10,692 crore (US$ 182.27 billion) with a total share of 24%, followed by Singapore at 24% with Rs. 12,57,392 crore (US$ 179.48 billion), the USA at 10% with Rs. 5,41,654 crore (US$ 76.26 billion), the Netherlands at 7% with Rs. 3,68,694 crore (US$ 53.97 billion), and Japan at 6% with Rs. 2,88,090 crore (US$ 44.94 billion).

The state that received the highest FDI equity inflow during April 2000-June 2025, was Maharashtra with Rs. 7,43,225 crore (US$ 94.04 billion) at 31%, followed by Karnataka at 21% with Rs. 4,94,318 crore (US$ 63.34 billion), Gujarat at 15% with Rs. 3,57,816 crore (US$ 46.11 billion), Delhi at 13% with Rs. 3,05,017 crore (US$ 38.90 billion), and Tamil Nadu at 6% with Rs. 1,38,248 crore (US$ 17.29 billion).

Investments/Developments

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:

Foreign Portfolio Investors (FPIs) returned as net buyers in October 2025, injecting about Rs. 3,682 crore (US$ 413 million) into Indian equities in the first half of the month.
Overall, foreign investors pumped approximately Rs. 14,610 crore (US$ 1.6 billion) into Indian equity markets in October, reversing three months of net outflows. Including debt markets, total net investment by foreign investors into Indian capital markets in October was around Rs. 18,117 crore (US$ 2.03 billion).
Union Minister of Commerce and Industry, Mr. Piyush Goyal stated that, in the past few months, investors worldwide have announced plans to invest over Rs. 50,000 crore (US$ 5.7 billion) in India's finance and banking sector, underscoring India’s emergence as a preferred destination amid global economic uncertainty.
The Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA) was implemented from October 1, 2025. EFTA has committed to investing Rs. 8,82,200 crore (US$ 100 billion) in India over 15 years and is expected to create around one million direct jobs.
India and the United Kingdom have signed the Comprehensive Economic and Trade Agreement (CETA), a bilateral free trade agreement marking a major milestone in their longstanding partnership, which is expected to boost foreign investment in India, thereby doubling bilateral trade from US$ 56 billion currently to ~US$ 120 billion by 2030.
Japan plans to announce a US$ 68 billion investment target in India over the next decade during Prime Minister Mr. Narendra Modi’s visit during August 2025. The commitment, expected to be formalized in a joint statement with Japanese Prime Minister Mr. Shigeru Ishiba, doubles the five-year, US$ 34 billion pledge made in 2022. The fresh plan focuses on semiconductors, AI, clean energy, pharmaceuticals, and critical minerals, aiming to boost supply chain security and reinforce Japan-India economic ties under a free and open Indo-Pacific vision.
Companies like Amazon, Walmart’s Flipkart, and other emerging online players have transformed India’s e-commerce landscape by investing billions into the sector, which is projected to grow at a CAGR of 21% and reach Rs. 28,17,750 crore (US$ 325 billion) by 2030.
According to S&P Global, India’s manufacturing sector is gaining global investor interest amid shifting trade dynamics. With resilient growth, supply-chain diversification, and competitiveness improvements, India is poised to boost manufacturing, attract FDI, and expand global export share.
Foreign Portfolio Investors (FPIs) made strong investments in the Indian equity markets in the second week of May 2025, bringing in Rs. 4,452.3 crore (US$ 519.58 million) between May 13 and May 16, according to data from the National Securities Depository Limited (NSDL).
India is considering allowing foreign investment in its nuclear energy sector. The government may permit up to 49% FDI in phases. Initial approval could be 26%, followed by a review. This move aims to boost nuclear energy production to 40 GW by 2035.
Foxconn is investing Rs. 12,894 crore (US$ 1.5 billion) to expand its Indian operations as Apple diversifies production away from China, aiming to mitigate geopolitical and tariff risks. This move follows Apple's plan to manufacture a majority of iPhones sold in the US in India.
Databricks plans to invest Rs. 2,133 crore (US$ 250 million) in India over 2027. The company is also planning to increase its headcount by over 50% to 750 by the end of the financial year, focusing on training, R&D, and go-to-market initiatives.
The Reserve Bank of India (RBI) in its April 2025 bulletin said India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages.
As per government officials, India has received over 20 foreign direct investment queries in February and March 2025 following the United States’ tariff move, as companies across sectors such as chemicals, automobiles, textiles, and electronics are exploring manufacturing and investment options in India.
In FY24, hospitals in India garnered a substantial Rs. 12,708 crore (US$ 1.50 billion) in FDI, representing half of all healthcare FDI. This uptick from 24% in FY21 and 43% in FY20 highlights the increasing significance of hospitals in attracting foreign investments.
India's Executive Director at the IMF, Mr. K V Subramanian, expressed strong confidence in India's path to becoming a US$ 55 trillion economy by 2047, as outlined in his new book “India@100: Envisioning Tomorrow's Economic Powerhouse”.
Maharashtra government has set an ambitious target to double the state’s GDP to US$ 1 trillion (Rs. 84,73,000 crore) by 2030. This would position Maharashtra’s GDP higher than that of countries such as Singapore, Switzerland, and the UAE. To reach this goal, the government aims for a compound annual growth rate (CAGR) of 14%, boosting the GDP from US$ 500 billion (Rs. 42,36,500 crore) to US$ 1 trillion (Rs. 84,73,000 crore).
As of April 17, 2024, the Ministry of Finance's notification on Foreign Direct Investment (FDI) in the Space sector signifies a pivotal advancement, offering Indian space startups expanded avenues to global capital. This development underscores a commitment to fostering growth, innovation, and alignment with international benchmarks within the space industry.
As of March 05, 2024, the Ministry of Commerce & Industry in India has reviewed the Foreign Direct Investment (FDI) Policy regarding the space sector, implementing changes in sectoral caps and entry routes for various activities within the sector, effective from the date of FEMA notification, and subject to sectoral guidelines issued by the Department of Space.
The amendment in the Foreign Direct Investment (FDI) policy for the space sector, approved by the Union Cabinet under Prime Minister Mr. Narendra Modi, it divides the satellites sub-sector into three activities with specified foreign investment limits. It also permits 100% FDI to attract investors to Indian space companies through enhanced entry routes.
The IT minister of India Mr. Ashwini Vaishnaw announced on 17th January 2024, that the country aims to achieve US$ 100 billion in annual Foreign direct investment (FDI) in the coming years, they anticipate a consistent growth rate of 6-8% over the next decade, underpinned by a meticulously devised strategy consisting of four major components.
The Ministry of Food Processing Industries Organised World Food India-2023 in New Delhi in November 2023. The event saw investment interests and MoUs totalling US$ 4 billion (Rs. 33,129 crore). To bolster the food processing sector, the Ministry promotes investment through schemes like PMKSY, PLISFPI, and PMFME, which has resulted in an estimated investment leverage of over US$ 3.12 billion (Rs. 25,869 crore).
NTPC Green Energy Limited (NGEL) signed a Memorandum of Understanding (MoU) with the Government of Maharashtra to collaborate on the development of Green Hydrogen and its derivatives, along with Pumped Storage Projects and renewable energy projects. This partnership, aligned with the state's Green Investment Plan for the next five years, anticipates an investment of around US$ 9.65 billion (Rs. 80,000 crore).
Union Minister Dr. Jitendra Singh announced that India has attracted over US$ 120 million (Rs. 1,000 crore) in investments in space startups within the first nine months of FY24, owing to the opening up of the space sector for private players by Prime Minister Mr. Narendra Modi. The sector has also witnessed a surge from one startup to nearly 190 in four years.
Karnataka has sealed eight MoUs valued at US$ 2.76 billion (Rs 23,000 crore) with global giants, showcasing a robust economic stride. Key agreements include Web Werks' US$ 2.4 billion (Rs 20,000) crore investment in a hyper-scale data centre and Microsoft's commitment to digital skilling initiatives. Hitachi aims to stimulate economic growth in rural areas. Additionally, MoUs worth US$ 360.97 million (Rs 3,000 crore) span digital healthcare, smart city infrastructure, renewable energy, and data centres. Companies, including Lulu Group and BL Agro, are set to establish facilities in north Karnataka, promoting equitable development. AI, sustainability, and citizen services emerged as focal points, signalling Karnataka's prowess in attracting diverse industries.
In January 2024, DP World sealed agreements worth US$ 3.0 billion (Rs 25,000 crore) with the Gujarat government during the Vibrant Gujarat Global Summit 2024. DP World Group Chairman and CEO, H.E. Sultan Ahmed bin Sulayem, inked these MoUs with Additional Chief Secretary of Ports and Transport Department Mr. M K Das, in the presence of Prime Minister Mr. Narendra Modi and President of the United Arab Emirates Mr. Sheikh Mohamed bin Zayed Al Nahyan. The deals focus on developing deep-draft ports, economic zones, and Special Economic Zones in south Gujarat and along the western coast. DP World's commitment includes investments in Gati Shakti Cargo Terminals and Private Freight Stations at various locations in Gujarat.
In January 2024, Prime Minister Mr. Narendra Modi inaugurated Boeing's cutting-edge US$ 192.51 million (Rs 1,600 crore) Engineering and Technology Centre near Bengaluru. Spanning 43 acres, it marks Boeing's largest investment outside the US. Located in Devanahalli, the campus is set to foster collaborations with startups, private entities, and the government, driving next-gen aerospace and defence solutions globally. The new campus aligns with Boeing's global engineering expansion, featuring future avionics manufacturing and assembly capabilities.
Hyundai Motors has successfully acquired General Motors India's Talegaon plant in Maharashtra and announced a substantial investment of US$ 721.94 million (Rs 6000 crore) in the state. The agreement, finalized at the World Economic Forum in Davos, signifies Hyundai Motors' commitment to expanding its manufacturing capacity in India. The Talegaon plant, with an annual capacity of 130,000 units, is set to resume operations in 2025. Hyundai Motors plans phased investments to upgrade infrastructure and equipment, aligning with global standards, aiming to achieve a one-million-unit annual production capacity, and further solidifying its position in the Indian market.
In 2024, Mercedes-Benz announced that it plans a US$ 24.03 million (Rs. 200 crore) investment in India, unveiling over 12 vehicles, including three electric models. Nearly half will be in the top-end vehicle segment, with prices starting at US$ 1,80,201 (Rs 1.5 crore). The move reflects the luxury carmaker's commitment to expanding its presence and embracing the growing electric vehicle market in India.

Government Initiatives

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’s Production Linked Incentive (PLI) schemes have attracted about Rs. 1,75,311 crore (US$ 20.3 billion) of investments across 14 strategic sectors by July 21, 2025. These sectors include electronics, pharmaceuticals, textiles, telecom, and automobiles. This push has led to over 806 approved projects and created more than 1.2 million direct and indirect jobs.
As part of the Union Budget 2025-26, the government has raised the sectoral cap for the insurance sector from 74% to 100%. Additionally, an Investment Friendliness Index for states will be introduced this year. The government is also set to launch Jan Vishwas 2.0 to enhance the business environment further.
Government permits 100% Foreign Direct Investment via automatic route for Aircraft Maintenance, Repair and Overhaul (MRO).
The government is taking steps such as facilitating foreign direct investments, nudge prioritisation, and promoting opportunities for using Indian rupee as a currency for overseas investments to simplify FDI regulations and to speed up the approval process.
In Union Budget 2024-25, a proposal has been made to support foreign shipping companies operating domestic cruises, recognizing the significant potential of cruise tourism. Additionally, foreign mining companies selling raw diamonds in the country will now be able to take advantage of safe harbour rates, which will benefit the diamond industry. Furthermore, the corporate tax rate for foreign companies has been reduced from 40% to 35% to attract foreign investment.
The Union Cabinet approved the signing and ratification of a Bilateral Investment Treaty between India and the United Arab Emirates aiming to boost investor confidence, attract foreign investments, and create opportunities for overseas direct investment, potentially leading to job creation. Additionally, it is anticipated to stimulate investments in India, aligning with the vision of ‘Atmanirbhar Bharat’ by promoting domestic manufacturing, reducing import reliance, and boosting exports.
The Union Cabinet approved an amendment to the Foreign Direct Investment (FDI) policy concerning the Space Sector, aligning with the vision of ‘Atmanirbhar Bharat’ outlined by Prime Minister Mr. Narendra Modi. This amendment liberalised the Space sector, allowing 100% foreign direct investment in specified sub-sectors/activities. The reform is expected to improve the Ease of Doing Business in India, attract greater FDI inflows, and stimulate investment, income, and employment growth.
In line with the 'Atmanirbhar Bharat' vision, the Union Cabinet approved the PLI Scheme for White Goods (Air Conditioners and LED lights) with a budget of US$ 752 million (Rs. 6,238 crore) from FY 2021-22 to FY 2028-29. The scheme has approved 64 applicants, with a total committed investment of US$ 816 million (Rs. 6,766 crore).
FDI equity inflows in India's manufacturing sector has seen significant growth, particularly over the last decade. The government reports indicate a 69% increase in FDI equity inflows in the manufacturing sector from Rs. 8,37,191 crore (US$ 97.7 billion) during 2004-14 to Rs. 14,14,742 crore (US$ 165.1 billion) during 2014-24. This growth is attributed to various factors, including the Make in India initiative, Production-Linked Incentive (PLI) scheme, and India's overall economic growth.
The Reserve Bank of India has taken several actions to increase foreign exchange inflows. These actions consist of:
- Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current interest rate regulations.
- Inclusion of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route (FAR) for FPls.
- Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made until October 31st, 2022.
- Permitting FPI in commercial paper and non-convertible debentures with an original maturity of up to one year.
- A temporary increase in the limit for external commercial borrowings (ECBs) under the automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.
- Increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower having an investment grade rating.
- Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund foreign currency loans to organisations for a variety of end uses other than exports.
The Government of India increased FDI in the defence sector by liberalizing it to 74% through the automatic route and 100% through the government route.
The Foreign Investment Facilitation Portal (FIFP) is a new online single-point interface of the government for investors to facilitate Foreign Direct Investment proposals to evaluate and further authorise them under the Government approval route.
The sectoral cap for the pharmaceutical industry has been lowered, 74% of FDI is permitted in the Brownfield pharma sector via the automatic method, and 100% is permitted via the approved route.
In the civil aviation sector, 100% FDI is allowed under automatic routes in brownfield airport projects.
For single-brand retail trading, local sourcing norms have been relaxed for up to 3 years and 100% FDI is allowed under automatic route.
The government has amended the Foreign Exchange Management Act (FEMA) rules, allowing up to 20% FDI in insurance company LIC through the automatic route.
Many reforms like National Technical Textiles, Silk Samagra-2 scheme, Seven Pradhan Mantri Mega Integrated Textile Region and Apparel (PM MITRA) Parks, Production Linked Incentive (PLI) Scheme for Textiles to promote the production of Man-Made Fibre (MMF) Apparel, MMF Fabrics and Products of Technical Textiles, and more initiatives are taken by the government to enhance export and to promote FDI in the textile sector.

Road ahead

India is emerging as a leading global hub for FDI, with inflows rising nearly 13% in FY25 and ranking among the world’s top destinations. Policy reforms such as corporate tax rationalisation, liberalised FDI caps, and Production-Linked Incentive schemes have boosted investor confidence across sectors including manufacturing, electronics, services, and renewable energy. India’s cost-efficient production base and the global “China+1” diversification strategy are positioning the country as a vital link in global supply chains. The government’s push to expand trade partnerships through agreements such as the India-UK FTA and the India-EU CETA is expected to further strengthen investment prospects. With strong inflows from Singapore, Mauritius, and the US, along with rising interest from newer geographies, India’s favourable demographics and pro-investment policies make it one of the most attractive destinations for long-term capitals.