Key Details
The Lok Sabha reply on “Foreign Direct Investment” distinguishes three measures that are often grouped under “FDI”: gross inflows, FDI retained after foreign-investor exits, and net FDI after also deducting overseas investment by Indian entities.
FDI Measure | 2022–23 | 2023–24 | 2024–25 |
|---|---|---|---|
Gross FDI Inflows | $71.4 billion | $71.3 billion | $80.6 billion |
Less: Repatriation and Disinvestment | $29.4 billion | $44.5 billion | $51.5 billion |
FDI to India After Repatriation | $42.0 billion | $26.8 billion | $29.1 billion |
Less: Overseas Investment by Indian Entities | $14.0 billion | $16.7 billion | $28.2 billion |
Net FDI | $28.0 billion | $10.2 billion | $1.0 billion |
Gross and Net FDI Have Diverged Sharply
The Lok Sabha reply on “Foreign Direct Investment” reports that gross FDI increased by $9.3 billion in FY2024–25. However, repatriation and disinvestment reached $51.5 billion, leaving $29.1 billion as FDI to India after foreign-investor exits.
Indian entities simultaneously invested $28.2 billion overseas, up from $16.7 billion a year earlier. Once this outward investment was deducted, net FDI fell to $1 billion — down from $10.2 billion in FY2023–24 and $28 billion in FY2022–23.
The Government attributes the recent net FDI trend to both developments. It describes outward investment as reflecting Indian companies’ efforts to acquire strategic assets, enter new markets and access technology. It also argues that foreign-investor exits can reflect successful investment monetisation and transfers of ownership to domestic investors.
These explanations provide context, but the reply does not quantify how much repatriation resulted from profits, stake sales, disinvestment or transfers to Indian owners.
Services Led Equity Inflows in FY2024–25
Sector-level information is available only for the equity component of FDI, not for total gross or net FDI. FDI equity inflows increased from $44.42 billion in FY2023–24 to $50.02 billion in FY2024–25.
The largest recipients were:
Services: $9.35 billion;
Computer Software and Hardware: $7.81 billion;
Trading: $4.18 billion;
Non-Conventional Energy: $4.01 billion;
Construction Infrastructure: $2.24 billion; and
Electronics: $2.04 billion.
Several sectors recorded substantial year-on-year increases, including services, electronics, cement and gypsum products, air transport, and hotels and tourism. Software and hardware remained the second-largest recipient despite a modest decline.
Gross FDI Reached a Record in FY2025–26
The reply states that gross FDI subsequently increased by 17% to a record $94.84 billion in FY2025–26.
However, it does not provide the corresponding repatriation, outward-investment or net FDI figures for that year. The record gross figure therefore shows stronger incoming investment activity, but does not establish that the decline in net FDI has reversed.
The Government’s response emphasises existing investment-facilitation measures, including automatic-route liberalisation, Production Linked Incentive schemes, the National Single Window System, regulatory-compliance reduction and recent FDI reforms in defence, insurance, telecommunications and space. It does not announce a separate capital-retention target or a new measure specifically linked to the $1 billion net FDI figure.
What Is Net FDI?
Gross FDI inflows include foreign equity investment, reinvested earnings and other capital entering the country. The reply first deducts repatriation and disinvestment - such as foreign investors withdrawing profits or selling investments - to calculate “FDI to India.” It then deducts overseas direct investment by Indian entities to arrive at net FDI.
A low net FDI figure does not necessarily mean that foreign investors have stopped investing. It may reflect substantial investor exits, greater overseas expansion by Indian companies, or both. These activities can have different economic implications, which is why gross inflows, repatriation, outward investment and net FDI should be examined separately.
Policy Relevance
Gross inflows alone provide an incomplete investment picture: The rise in incoming FDI coincided with a steep fall in net FDI because exits and Indian overseas investment also increased.
Repatriation should not automatically be classified as capital flight: It may represent profit distribution, portfolio restructuring, successful exits or the purchase of foreign-held stakes by domestic investors; each has different policy implications.
Outward investment can strengthen Indian firms: Acquiring foreign assets, markets and technology may support long-term competitiveness even though it reduces the net FDI measure in the year of investment.
Investment quality matters alongside retention: Greenfield capacity, employment, technology transfer, exports and domestic value addition may reveal more than the headline net figure alone.
Sectoral equity data cannot explain the full decline: The published sector figures exclude reinvested earnings, other capital, repatriation and overseas investment.
FY2025–26 requires a complete investment account: Net FDI, repatriation and outward-investment figures are needed before the record gross inflow can be interpreted as an improvement in retained foreign investment.
Policy assessment needs more detailed exit data: Separating profit repatriation, foreign stake sales, domestic acquisitions and business closures would help distinguish a maturing investment market from weakening investor commitment.
Relevant Question for Policy Stakeholders: What combination of gross inflows, reinvested earnings, greenfield investment, foreign-investor exits and overseas expansion should India use to judge whether FDI is producing durable domestic economic capacity?
Follow the Full Reply Here: Lok Sabha Unstarred Question No. 2696: Foreign Direct Investment