India’s FDI Soars by 26.4% in Q1 2024-25

Foreign direct investment (FDI) in India surged by 26.4 percent, reaching US$22.4 billion, during the period from April to June, reflecting the strongest growth in over five quarters. Key sectors such as manufacturing, financial services, communication, and energy drew significant interest, with Singapore, the US, Mauritius, and Belgium among the top contributors.

Net foreign direct investment (FDI) in April to June of the current fiscal year (FY 2024-25) reached US$6.9 billion, up from US$4.7 billion during the same period the previous year, as per the Reserve Bank of India‘s latest report. This rise was fueled by a 26.4 percent year-on-year growth in gross inward FDI, which totaled US$22.5 billion in Q1 of 2024-25.

Despite the overall decline in FDI over the past two years, gross inflows had already shown a 23 percent increase in the prior quarter, supported by strengthening global cross-border investments. In June, FDI inflows rose by 37.6 percent, though this was lower than the 49 percent increase observed in the previous month.

Manufacturing, financial services, and communications attract maximum FDI in India

The RBI’s bulletin noted that about 80 percent of these FDI inflows went into the manufacturing, financial services, communications, and energy sectors, with Singapore, Mauritius, the Netherlands, the US, and Belgium being the leading source countries, contributing around 75 percent of the inflows. Equity investments, which grew by 46 percent in the first quarter to US$16.5 billion, were a key driver, with US$4.2 billion directed towards share acquisitions—2.5 times more than in the same period of 2023.

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This trend bolsters India’s aspirations to establish itself as a top destination for foreign investments, particularly as global companies aim to reduce reliance on China. Global cross-border investment announcements totaled US$635 billion in the first half of 2024, with the renewable energy, semiconductors, and communications sectors accounting for half of these investments.

India has recently seen considerable foreign investment in the electronics production domain, including mobile phones and components, as well as in global capability centers. Multinational corporations are increasingly leveraging India’s expertise in IT, R&D, risk management, and design across various industries.

FDI trend in India’s energy sector

According to data from the Ministry of Commerce and Industry, Foreign Direct Investment (FDI) in India’s renewable energy sector increased by 50 percent in the 2023-24 financial year, reaching US$3.76 billion compared to US$2.5 billion in 2022-23. Since FY 2010-11, cumulative FDI in the renewable sector has totaled US$17.07 billion.

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The sector permits 100 percent FDI under the automatic route, meaning no prior government approval is required.

FDI in the power sector also saw substantial growth, rising by 144 percent to US$1.7 billion in FY 2023-24, up from US$697.92 million the previous year.

However, investments in the petroleum and natural gas sectors experienced a sharp decline, with FDI in the non-renewable energy sector plummeting by 81 percent year-over-year to US$32.57 million in 2023-24, down from US$171.65 million the previous year.

The overall net FDI in FY 2023-24 dropped significantly to US$9.8 billion, down from US$28 billion in the previous year and US$38.6 billion in FY 2021-22. Net FDI refers to the difference between the total amount of FDI inflows into a country and the total amount of FDI outflows from that country over a specific period.

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