FDI inflows to India rise by 44% to $39 billion in 2025

• Foreign Direct Investment (FDI) inflows to India increased by 44 per cent in 2025 to $39 billion, according to the 2026 World Investment Report, released by United Nations Trade and Development (UNCTAD) on July 7.

• Global foreign direct investment rose 6 per cent to $1.6 trillion in 2025, ending two years of decline, but the recovery remains narrow, fragile and uneven.

Foreign Direct Investment (FDI)

• Foreign direct investment (FDI) is a major driver of economic growth and a source of non-debt finance for the economic development of India.

• FDI flows into India have grown consistently since liberalisation and are an important component of foreign capital since FDI infuses long term sustainable capital in the economy and contributes towards technology transfer, development of strategic sectors, greater innovation, competition and employment creation amongst other benefits.

• After abolition of the erstwhile foreign investment Promotion Board (FIPB), process for granting FDI approvals has been simplified wherein the work relating to processing of applications for FDI and approval of the government thereon under the extant FDI Policy and FEMA, is now handled by the concerned ministries/departments.

• The Department for Promotion of Industry and Internal Trade (DPIIT) is mandated with the task of formulation of FDI policy of the government of India.

• The policy pronouncements on FDI are made by DPIIT and necessary notifications are issued under Foreign Exchange Management Act, 1999.

• The DPIIT also maintains data on inward FDI into India based upon the remittances reported by the Reserve Bank of India (RBI).

• National Single Window System (NSWS) has been launched as the online single point interface of the government of India for investors to start any industry in India and take requisite permissions. This portal is also used for seeking government approval for FDI, wherever required.

• FDI in India is permitted either through the automatic route or the government approval route.

i) Automatic Route: Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the government of India for the investment.

ii) Government Route: Under the Government Route, prior to investment, approval from the government of India is required. Proposals for foreign direct investment under government route, are considered by respective administrative ministry/department.

What the report says about India’s FDI?

• India continued to strengthen its position as a major investment destination in 2025, supported by an active policy agenda aimed at broadening its investment base beyond services and accelerating advanced manufacturing.

• To attract investment into priority industries, such as electronics, semiconductors and related manufacturing activities, the country launched programmes such as the Production-Linked Incentive schemes, Make in India, Startup India and the National Industrial Corridor Development Programme.

• These initiatives have been complemented by reforms aimed at creating a more conducive investment environment.

• The reformed FDI regime has reinforced openness to foreign investors, while institutional mechanisms such as Project Development Cells and the Project Monitoring Group have aimed to facilitate approvals and project implementation.

• These efforts have contributed to boosting investment momentum, including in manufacturing.

• Announced greenfield investment in manufacturing increased sharply from 2021 to 2024, reflecting the country’s growing role in selected segments of global value chains, including electronics.

• In 2025, however, this trend was interrupted by a more uncertain global environment.

• Although total FDI inflows rose to $39 billion, project indicators pointed to a more cautious investment cycle. The total value of announced greenfield investment declined from more than $111 billion in 2024 to about $74 billion in 2025, while the number of projects fell marginally.

• The slowdown was concentrated in manufacturing, where announced investment values fell from about $65 billion in 2024 to $27 billion in 2025.

• The decline was most visible in capital-intensive sectors where investment values fell significantly.

• In many cases, project numbers declined only moderately, suggesting smaller project sizes rather than fewer commitments.

• Electronics-related manufacturing remained one of the largest manufacturing segments by value and number of projects, despite the decline from the previous year’s high.

• Investment in services remained resilient. Greenfield investment was broadly stable, exceeding manufacturing investment.

• Information and communication technologies (ICT) became the largest sector in 2025, reflecting continued expansion in digital infrastructure and technology-related activities.

• Financial services also recorded renewed activity.

• The policy framework in India remains oriented towards advanced manufacturing, infrastructure development and deeper integration into global value chains.

• However, tariff uncertainty, supply chain realignment and weaker global investment sentiment are affecting the scale of new manufacturing and infrastructure commitments.

What is the scenario in other regions?

• Developed economies received $723 billion, up by 11 per cent, while developing economies received $901 billion, up by 2 per cent. High-income economies accounted for most of the increase.

• Investment also became more concentrated. The top 20 host economies received more than 80 per cent of global inflows. The United States remained the largest destination, receiving $277 billion.

• The US was also the largest source of FDI, followed by Japan and China. • The top five source economies accounted for almost half of global outflows.

• Europe recorded most of the global increase.

Investment in strategic sectors surges

• Investment is booming in strategic sectors like artificial intelligence (AI), semiconductors and critical minerals.

• But the gains are concentrated, leaving out many developing countries.

• Meanwhile, manufacturing outside strategic sectors is retreating.

• Five strategic sectors are attracting a growing share of global investment.

• Announced greenfield investment in these sectors rose from $109 billion in 2020 to $576 billion in 2025.

The five strategic sectors include:

i) Artificial intelligence (AI) infrastructure and related technologies, such as data centres, cloud computing and cybersecurity.

ii) Advanced and sensitive technologies, including biotechnology, robotics, quantum technologies and space systems.

iii) Critical minerals, such as copper, lithium and rare earth elements.

iv) Energy-transition technologies and services, including batteries, electric vehicles, hydrogen and carbon capture.

v) Semiconductors, including chip fabrication, design-enabling activities and production equipment.

Patterns differ by sector:

• AI infrastructure: The largest strategic sector. The US is the leading source of investment, while the European Union is the main destination.

• Advanced technologies: Investment also centres in the US and Europe.

• Energy transition technologies and services: Investment is more geographically diversified, spanning different segments of the green production chain.

• Critical minerals: China leads outward investment and plays a major role in processing capacity, while resource-rich developing countries attract growing investment.

• Semiconductors: Announced investment is growing the fastest but is also the most concentrated. Investment from Taiwan to the US accounted for about one third of the global total from 2020 to 2025.