Mumbai: India continues to attract foreign direct investment (FDI) despite subdued global flows, according to a new report by CareEdge Ratings. The study highlights that while worldwide FDI has slowed, India has maintained annual gross inflows in the range of $70–85 billion over the past five years, with growth picking up in the current financial year. The report positions India as one of the more resilient destinations for investors, supported by reforms and a strong return profile.
Globally, FDI has been on a downward trajectory. CareEdge notes that the ratio of FDI flows to GDP fell to 1.3 per cent in 2024, down from 2.4 per cent in 2021. This decline reflects a longer trend since the 2008 financial crisis, with Europe’s share shrinking, US outflows stagnating and China’s outward investment rising sharply. Countries benefiting from the China+1 strategy, such as Vietnam and Mexico, have seen notable gains, while resource‑rich nations in Africa have also attracted higher inflows. Against this backdrop, India’s ability to sustain inflows stands out.
The report finds that India’s services sector was the largest recipient of FDI equity in 2025, followed by computer software and hardware, trading and renewable energy. Greenfield projects in manufacturing have also expanded, particularly in semiconductors, electronics, EV components and basic metals. CareEdge points out that this diversification is critical, as it reduces reliance on a single sector and signals broader investor confidence. “India’s manufacturing story is beginning to show results, with global players committing capital to long‑term projects,” the report states.
Outward investment from Indian firms has also risen. Average annual overseas investment has reached $20 billion in the past three years, compared with $8 billion before the pandemic. CareEdge highlights a 20 per cent increase in greenfield project announcements by Indian investors in 2024, placing the country among the world’s top ten investor nations. This outward push reflects the growing ambition of Indian companies to establish a global footprint, even as they continue to draw foreign capital into domestic projects.
The report underscores India’s strong return on inward FDI, averaging 7.3 per cent. On a risk‑adjusted basis, India ranks second only to Indonesia among major economies analysed. This performance, CareEdge argues, is a key factor in sustaining investor interest despite global uncertainty. “Returns remain robust, and when adjusted for risk, India compares favourably with peers,” the report notes, adding that this strengthens the country’s case as a stable destination.
Policy reforms have played a significant role in bolstering investor confidence. CareEdge points to recent labour code simplifications and ongoing efforts to improve infrastructure and reduce logistics costs. These measures, combined with regulatory reforms in financial markets, are expected to enhance India’s ability to attract diversified and stable inflows. The report suggests that continued progress in these areas will be essential to maintain momentum, particularly as global competition for capital intensifies.
At the same time, CareEdge acknowledges challenges. Higher repatriation of profits and increased outward FDI from India have weighed on net inflows, even as gross figures remain strong. The report cautions that balancing inflows with outflows will be important to ensure sustained benefits for the domestic economy. Nevertheless, the overall outlook remains positive, with India positioned as a leading destination for both greenfield and equity investments.
The findings reinforce India’s role in the global investment landscape. While many economies struggle to attract capital, India’s combination of sectoral diversity, policy reforms and strong returns has kept it on investors’ radar. As CareEdge concludes, the country’s ability to adapt and strengthen its frameworks will determine how far it can build on this momentum. For now, India’s resilience offers a rare bright spot in an otherwise subdued global FDI environment.
