The drop in net FDI was driven by two key trends: an increase in repatriation of profits by foreign companies operating in India, and a surge in outward investment by Indian firms.
Published May 25, 2025 | 7:22 PM ⚊ Updated May 25, 2025 | 7:22 PM
The RBI called it a sign of a mature market “which reflects positively on the Indian economy.”
Synopsis: India’s net foreign direct investment (FDI) plummeted by 96 percent in 2024–25 to just US$353 million, despite gross FDI inflows rising to US$81 billion, according to the Reserve Bank of India (RBI). The sharp decline was attributed to record-high repatriations by foreign investors and a 75 percent surge in outward investments by Indian firms. The RBI called it a sign of a mature market “which reflects positively on the Indian economy.”
India’s net foreign direct investment (FDI) inflows fell by a whopping 96 percent in 2024–25, dropping to just US$353 million from US$10.1 billion in 2023-24, according to the Reserve Bank of India’s May Bulletin.
The sharp decline comes despite an increase in gross FDI inflows, which rose 13.7 percent to US$81 billion from US$71.3 billion in 2023–24. Net FDI is the difference between gross FDI inflows and the sum of repatriation and outward FDI.
The drop in net FDI was driven by two key trends: an increase in repatriation of profits by foreign companies operating in India, and a surge in outward investment by Indian firms.
According to the RBI, repatriation and disinvestment by foreign investors rose to US$51.5 billion during the year, the highest in at least a decade and up from US$44.5 billion in the previous year.
At the same time, Indian companies invested US$29.2 billion abroad, a massive 75 percent increase from US$16.7 billion in 2023–24.
“This is a sign of a mature market where foreign investors can enter and exit smoothly, which reflects positively on the Indian economy,” the RBI said in its bulletin.
However, the report does not offer any reasons behind the record-high repatriations, nor does it assess the returns on India’s rising overseas investments.
The RBI noted that gross FDI inflows continue to be concentrated in sectors such as manufacturing, financial services, energy, and communications, which together accounted for more than 60 percent of the total.
The majority of the capital came from Singapore, Mauritius, the UAE, the Netherlands, and the United States.
On the other hand, the rise in India’s outward FDI was led by the financial, banking and insurance sectors, followed by manufacturing, trade, hospitality, and related services.
These sectors accounted for over 90 percent of the increase. The primary destinations mirrored the sources of India’s inward flows – Singapore, the US, UAE, Mauritius, and the Netherlands.
Foreign portfolio investors (FPIs) pulled out US$2.4 billion from Indian markets in April, according to the RBI bulletin. While the report does not offer an explanation for the trend, the Donald Trump-led US administration’s tariffs might be one reason.
For instance, the RBI says the equity FPI inflows “turned marginally positive” in the latter half of April following a 90-day pause on US tariff measures and speculation around a US–India trade deal.
“While equity FPI turned positive in the latter half of the month – supported by the 90-day pause in the US tariff implementation and growing optimism around a potential US–India trade agreement – overall FPI flows remained negative during April 2025. The UK and the European equities have led global gains year-to-date post ‘Trump 2.0’, while Indian equities performed well among emerging markets following the April market trough and recorded inflows,” the report said.
The debt segment bore the brunt, registering net outflows of more than US$3.7 billion – the largest single-month withdrawal since the March 2020, at th height of the Covid19 pandemic.
“This was driven by diminished global risk appetite amid tariff-related volatility, a narrowing yield differential between Indian and US bonds, and a possible reallocation of foreign capital towards Indian equities,” the report said.
(Edited by Dese Gowda)
