Over the years, India has emerged as one of the fastest-growing economies in the world, and it now offers a growing and thriving environment for investments, both domestic and foreign. With the largest youth population in the world, it provides prospective investors with a highly skilled workforce and a strong work ethic.
India's huge domestic consumption, led by the private sector, has played a major role in the country's growth. India has an estimated middle class of 400 million people who are the main drivers of consumption expenditure. This emerging middle class and increasing disposable incomes are the largest factors behind the increasing domestic consumption in India. It is estimated that the private consumer market in India will increase four times by 2025. The present government is also focusing on rural areas and farmers, as rural India is also emerging as an upcoming market for all types of consumer goods.
A host of government initiatives has also enabled India's investment growth, which includes developing India's financial system, improving the infrastructure, and relaxing FDI norms. The Government has propagated an investor-friendly FDI policy, in which most sectors are open for 100% FDI under the automatic route. India's FDI policy is also reviewed on an ongoing basis to ensure that India remains an attractive and investor-friendly destination.
Nominal GDP for FY25 is estimated at Rs. 33.10 lakh crore (US$ 3.8 trillion) with growth rate of 9.9%, compared to Rs. 30.12 lakh crore (US$ 3.5 trillion) for FY24. Real GDP for FY25 is estimated at Rs. 187.95 lakh crores (US$ 2.2 trillion) with growth rate of 6.5%, compared to Rs. 176.51 lakh crore (US$ 2.06 trillion) for FY24. These figures make India the fastest-growing major economy in the world, and this economic growth has translated to the domestic investment market in India. Retail investors, mutual funds, and PE/VC firms have all stepped up their domestic investments in the Indian market.
The stock market has seen a significant increase in the number of retail investors, exceeding 9.5 crore. These investors directly hold nearly 10% of the market through investments in 2,500 listed companies. Retail investments, both direct and indirect through mutual funds, have increased over tenfold in the past decade, with the total number of investors reaching 10.9 crore as of December 2024, according to data from the National Stock Exchange (NSE).
India ranked fourth globally in tech venture capital (VC) investments recording US$ 24.1 billion in 2022. According to a report by Startup Genome, India has 429 scale-up companies with a total VC investment of US$ 127 billion and a cumulative tech value investment of US$ 446 billion. Moreover, India ranks fourth globally in terms of start-ups that have secured over US$ 50 million in disclosed venture capital (VC) investment.
On the FDI front, according to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 89.88 lakh crore (US$ 1.05 trillion) between April 2000-December 2024; this was mainly due to the government's efforts to improve the ease of doing business and relaxed FDI norms.
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).
India's Private Equity (PE)/Venture Capital (VC) investment environment is also scaling new heights, with increases in deal size, deal activity, and fundraising, as well as improvements in term sheets and benchmarking practices. In Q1 CY25, private equity (PE) and venture capital (VC) investments stood at Rs. 1,16,861 crore (US$ 13.7 billion) across 284 deals.
Around 239 SME companies went public in FY25, raising a total of Rs. 9,966 crore (US$ 1.17 billion) through IPOs.
Recent speedy infrastructure investments, the inclusion of more sectors under the PLI scheme, an increase in public investments, and increasing PE/VC activity have led to plenty of investments in the Indian market. A stabilizing economic backdrop and financial oversight have provided investors with a perfect opportunity to invest in the country and have made India a rising economic powerhouse. Some of the recent investments and developments in this space are as follows:
The steps taken by the Government during the last few years to attract investments have borne fruit, as is evident from the record volume of FDI inflow that was received in the country in FY22. The government has launched policies that significantly simplify the ease of doing business, as evidenced by India's jump from rank 142 in 2015 to rank 63 in 2020 in the Doing Business Reports of the World Bank. Some of these policies are:
India is presently known as one of the most important players in the global economic landscape.The Reserve Bank of India (RBI), to boost India's digital economy, is planning to launch the Central Bank Digital Currency (CBDC) as India's official digital rupee. The digital rupee will play a crucial role in improving the speed of transactions and reducing the cost of cash.
Increased government investment is expected to attract private investments, both domestic and foreign. The government's key production-linked incentive (PLI) schemes in multiple sectors will provide significant support to the manufacturing sector. The PLI schemes in 14 different sectors can lead to additional production of Rs. 30 lakh crore (US$ 401 billion) over the next five years, as well as create employment for 60 lakh people.
Gradual opening of the economy by relaxing FDI norms, increase in consumer demand and income, improving the financial infrastructure of the country, and continued policy support towards industries by the government in the form of the Aatmanirbhar Bharat Abhiyan and various PLI schemes have led to an upturn in the performance of the investment sector in India, which is set to scale new heights in the coming years.