The recent decline in India's net foreign direct investment (FDI) inflows is primarily the result of rising overseas investments by Indian companies and higher repatriation of earnings by foreign investors, the government informed Parliament on Tuesday. Officials maintained that the trend reflects the growing global ambitions of Indian businesses rather than any weakening of the country's investment climate.
In a written reply to the Lok Sabha, Minister of State for Commerce and Industry Jitin Prasada explained that the increase in outward direct investment (ODI) demonstrates the expanding international footprint of Indian enterprises. According to the minister, Indian companies are increasingly investing abroad to acquire strategic assets, enter new markets, strengthen global supply chains and gain access to advanced technologies that can enhance their competitiveness.
The government noted that net FDI inflows have declined significantly over the past three financial years. Net FDI stood at USD 28 billion in 2022-23, fell to USD 10.2 billion in 2023-24, and further declined to around USD 1 billion in 2024-25. While these figures indicate a sharp moderation, the government emphasized that net FDI is influenced by several factors beyond fresh investment inflows, including outward investments by domestic firms and the repatriation of capital and profits by foreign investors.
Prasada said the rise in outward direct investment should be viewed as a positive indicator of India's growing economic strength and the confidence of domestic companies in expanding beyond national borders. Indian businesses are increasingly pursuing acquisitions, establishing overseas subsidiaries and investing in international operations as they seek to diversify revenue streams and strengthen their presence in the global marketplace.
The minister explained that such investments enable Indian companies to access new customers, secure critical resources, integrate into global value chains and benefit from technological innovation. These overseas ventures, he said, are expected to contribute to India's long-term economic growth by enhancing the capabilities and competitiveness of domestic enterprises.
The government also pointed out that increased repatriation by foreign investors is a normal feature of a mature investment environment. As foreign companies operating in India generate profits, many choose to repatriate part of their earnings or divest older investments after achieving their business objectives. Such capital movements affect net FDI calculations even when gross foreign investment inflows remain healthy.
Officials stressed that India continues to be regarded as one of the world's most attractive destinations for foreign investment, supported by its large domestic market, expanding infrastructure, improving ease of doing business and a series of policy reforms aimed at encouraging investment across sectors.
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The government has undertaken several initiatives in recent years to strengthen the investment ecosystem, including liberalising FDI norms in multiple sectors, simplifying regulatory procedures, promoting digital governance and implementing production-linked incentive (PLI) schemes to boost domestic manufacturing. These measures, along with continued infrastructure development and economic reforms, are expected to sustain investor confidence over the medium and long term.
Economists often note that net FDI figures provide only one perspective on investment trends. Gross FDI inflows, outward investments and repatriation flows together offer a more comprehensive picture of capital movement. A decline in net FDI does not necessarily imply a reduction in investor interest, particularly when domestic companies are simultaneously expanding overseas and foreign investors continue to earn returns on their investments in India.
The government reiterated that India's growing outward investment reflects the increasing maturity of its corporate sector and its ability to compete globally. As Indian companies continue to expand internationally while the country remains an attractive destination for foreign capital, policymakers expect cross-border investment activity to remain an important driver of economic growth and global integration.
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