India has crossed a significant milestone, surpassing $1 trillion in cumulative Foreign Direct Investment (FDI) inflows since 2000. This achievement underscores India’s growing status as a leading global investment destination. According to data from the Department for Promotion of Industry and Internal Trade (DPIIT), the total FDI inflow reached $1.09 trillion by September 2024, including equity investments totaling Rs 45.96 trillion ($708.65 billion). Notably, over 69% of this FDI came in the last decade (April 2014–September 2024).
In the first half of FY25, India saw a 26% year-on-year increase in FDI inflows, amounting to $42.1 billion. The Ministry of Commerce and Industry highlighted that FDI plays a crucial role in bringing non-debt financial resources, facilitating technology transfers, and generating employment.
During the July-September 2024 quarter, total FDI inflows reached $19.81 billion, with equity investments contributing $13.61 billion.
Mauritius and Singapore Lead FDI Sources
Mauritius has been the largest source of FDI, contributing 25% of total inflows. Between April 2000 and September 2024, Mauritius invested over $177 billion, with $5.34 billion in the first half of FY25 alone.
Singapore follows closely behind, accounting for 24% of the total FDI, with an investment of $167.5 billion during the same period. In FY25’s first half, Singapore surpassed Mauritius, contributing $7.5 billion in investments. Both countries benefit from favorable tax treaties that make them attractive for investment flows into India.
The United States ranks third, contributing 10% of total inflows, followed by the Netherlands (7%), Japan (6%), and the United Kingdom (5%). Other countries like the UAE, Germany, and Cyprus contributed 2-3% each.
Services Sector Leads FDI, but Shows Recent Decline
The services sector, including financial services, IT, and consulting, attracted the largest share of FDI. Between April 2000 and September 2024, it garnered $115.19 billion, or 16% of India’s total FDI. However, the sector has seen a decline in recent years. It attracted $8.7 billion in FY23, which fell to $6.64 billion in FY24 and further declined to $5.69 billion by mid-2024.
The computer software and hardware sector was the second-largest recipient of FDI, with $107.08 billion (15% of total FDI), followed by trading ($67.96 billion or 7%) and telecommunications (6%). The auto sector also received a notable share of investments at 5%.
Manufacturing saw a significant surge in FDI, increasing by 69% over the last decade, driven by initiatives like “Make in India” aimed at boosting domestic production and exports.
Reforms Fueling India’s FDI Growth
India’s pro-investor reforms have played a key role in attracting global investments. Initiatives like “Make in India,” sectoral liberalization, and the introduction of the Goods and Services Tax (GST) have increased investor confidence. Recent measures, such as the elimination of angel tax on startups and the reduction of corporate tax rates for foreign companies, have further boosted India’s appeal.
India allows 100% FDI in most sectors under the automatic route, requiring only post-investment notification to the Reserve Bank of India (RBI). However, certain sectors, such as telecommunications, media, and insurance, require government approval. Sectors like gambling, lotteries, real estate, and tobacco manufacturing are prohibited from receiving FDI, reflecting India’s focus on promoting ethical and strategic investments.