India Experiences a Record 96.5% Drop in Net FDI Due to Heightened Repatriation
Record Low for India’s Net FDI in FY25
India’s net Foreign Direct Investment (FDI) plummeted to an unprecedented $353 million in FY25, marking a staggering 96.5% decrease from the previous financial year. This significant decline is attributed to substantial repatriation, outbound investments, and a thriving IPO market.
Current Trends Affecting FDI
According to data from the Reserve Bank of India (RBI), the net FDI in FY25 reached its lowest point ever, in stark contrast to the $10 billion recorded in FY24. The remarkable decrease was largely influenced by a vigorous IPO market, enabling long-term foreign investors, including Alpha Wave Global and Partners Group, to achieve substantial returns through stake divestments in companies like Hyundai Motor and Swiggy.
Factors Contributing to the Decrease
The RBI highlighted that the drop in net FDI was primarily due to increased outward investments made by Indian companies, along with escalated repatriation by foreign stakeholders. The funds repatriated by investors soared to $49 billion in FY25, up from $41 billion the year prior.
Outbound Investments Surge
Analysis from the RBI’s monthly bulletin indicated that Indian firms were also actively investing abroad, with outbound direct investments rising to $29 billion, compared to $17 billion in FY24. This surge reflects a growing inclination among Indian businesses towards global supply chains and international market opportunities.
Private Equity and Venture Capital Exits on the Rise
In FY25, private equity and venture capital firms reported exits amounting to $26.7 billion, representing a 7% increase from the previous year, as noted in a report by IVCA and EY. The preferred avenues for these exits were open market transactions and IPOs. A notable example includes Hyundai, which offloaded part of its stake during its substantial ₹27,870 crore IPO, while a prominent investor in Swiggy reportedly gained over $2 billion post-listing, according to The Economic Times.
Growth in Gross Inward FDI
Despite the decline in net FDI, gross inward FDI actually saw a notable rise of 13.7%, reaching $81 billion in FY25. Key sectors that attracted this investment included manufacturing, financial services, electricity and energy, and communication services, collectively accounting for more than 60% of the reported inflows.
Significant Increase in Outward Foreign Direct Investment
India’s outward foreign direct investment (OFDI) also experienced impressive growth, soaring over 75% to $29.2 billion during the 2024–25 period. Major recipient countries for these investments were Singapore, the United States, UAE, Mauritius, and the Netherlands. Sector-specific data indicated that the financial, banking, and insurance services sectors led the investments, followed by manufacturing, wholesale and retail trade, and the hospitality industry.
