Foreign direct investment into India has slowed in 2024 amid global geopolitical turbulence and a tightening funding environment. According to the latest World Investment Report by the United Nations Conference on Trade and Development, FDI inflows contributed just 2.3% to India’s total capital formation this year, down sharply from 8.8% in 2020. This signals a diminishing role for FDI in India’s economic development.
Despite the decline, India rose one place to 15th among the world’s top FDI destinations in 2024, compared with 16th in 2023 when it attracted $28.1 billion in inflows. However, the report highlights that global FDI remains volatile, fragmented, and disproportionately concentrated—leaving many developing nations, particularly in the Global South, at risk of being sidelined.
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Outbound investments on the rise
While the United States led global greenfield investment in sectors such as semiconductors and automobiles, India’s outbound investments in 2024 were primarily in semiconductors and basic metals. The Reserve Bank of India, in its monthly economic bulletin, noted that gross FDI inflows were largely directed toward manufacturing, financial services, electricity and energy, and communication services—sectors that together accounted for over 60% of the inflows. Singapore, Mauritius, the UAE, the Netherlands, and the US made up more than 75% of the total investment into India.
A notable development has been the surge in India’s outward FDI. The country jumped to 18th place globally in FDI outflows, with $24 billion in overseas investments, up from $14 billion in 2023. Total outbound investment from India rose 75% to $29.2 billion in FY25. During the same period, foreign firms repatriated an estimated $51 billion from India, revealing the volatility of global capital flows.
Despite a significant number of greenfield projects being announced—1,080 in 2024, ranking India fourth globally—the actual investor response has been cautious. Nonetheless, India remained among the top five countries in terms of international project finance deals, securing 97 transactions during the year.
Asia continues to attract FDI inflows
Asia retained its position as the leading destination for FDI in 2024, attracting $605 billion, which accounted for 40% of global FDI and 70% of total flows to developing countries. India remained South Asia’s largest recipient of FDI, ahead of regional peers like Pakistan and Sri Lanka. However, investment sentiment across Asia softened, with China seeing FDI fall by 29% for a second consecutive year.
In contrast, the ASEAN bloc registered a 10% rise in FDI to a record $225 billion, while West Asia also held strong due to robust inflows into the UAE. The United States continued to lead globally, with inflows rising from $233 billion in 2023 to $279 billion in 2024.
Analysts interpret India’s growing outbound FDI as a sign of maturity in Indian corporates, long supported by inbound flows from venture capital and private equity. Many draw comparisons with China’s two-decade global investment push, which enabled Beijing to acquire technology, resources, and market access, consolidating its role in global trade.
Among its regional peers, India remains an outlier. It attracted nearly 80% of all FDI inflows into South Asia and saw a surge in capital expenditure, particularly in manufacturing. Projects in semiconductors and basic metals propelled capital spending to a record $110 billion—nearly a third of all capital expenditure announced in Asia in 2024.
Government efforts to position India as a global investment hub have intensified, with recent months witnessing a pick-up in announcements. The Union Budget has outlined new measures to boost investment, including a push for deregulation and reduced compliance burdens.
Infrastructure push holds the key
Geopolitical uncertainty—driven by US-led trade and tariff shifts—continues to weigh on investor sentiment. Even so, there is optimism that India could benefit from the global pivot to diversify away from China.
While most sectors in India already permit FDI under the automatic route, scope for further liberalisation is limited. Future inflows will depend on reforms aimed at addressing persistent gaps in tax structures, regulatory clarity, and judicial efficiency.
Although India’s share of global FDI peaked in 2020, the trend has since turned downward. Nonetheless, India Ratings and Research has noted that rising infrastructure spending by both the central and state governments may help revive foreign investment momentum.