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Foreign direct investment (FDI) inflows in equity recorded robust year-on-year growth in FY25 (April to December 2024), but reflecting global uncertainties, FDI equity inflows into India have been declining over the three quarters of this fiscal year. As per provisional data for FDI compiled from the Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflows in the nine months of this fiscal year were $40.7 billion compared to $32 billion in the same period in FY24.
For the full fiscal year 2024, FDI equity inflows stood at $44.4 billion. Despite this YoY growth, the quarter-wise data suggests a cause for concern.
FDI equity was $16.2 billion from April to June 2024, and this dipped to $13.6 billion in quarter ended September 2024, and further declined to $10.
9 billion in the December quarter. In terms of origin countries, Singapore, Mauritius, UAE, Netherlands and the US (in that order) lead as key destinations from which FDI is coming in, holding almost 75 per cent of the FDI equity inflows between them. The UAE and Netherlands have recorded robust growth of 71 and 78 per cent, respectively, in this fiscal year.
Looking at FDI sector-wise, the services sector (BFSI and other services) and Computer (software and hardware) remain key industries, bringing in FDI at $7.2 billion and $5.5 billion, respectively, from April - December 2024.
This represents a 38 per cent and 62 per cent YoY growth, respectively. Interestingly, the non-conventional energy space has generated $3.5 billion in FDI inflow this year to become the third largest sector.
In a sign of slowing infra activities, the FDI inflow in the construction sector for FY25 (April-Dec) was $1.8 billion compared to $3.8 billion last year during the same period.
Maharashtra emerged as the leader of the pack raking in $16.7 billion in fresh FDI equity inflows in FY25 (April-Dec) at a YoY growth rate of 38 per cent. Gujarat, at second spot, got $5.
6 billion in FDI, but this was a decline of 3 per cent YoY. Karnataka jumped to the third spot, overtaking Delhi as the Southern state recorded a 22 per cent growth in FDI at $4.5 billion.
In another rejig of the toppers table, Tamil Nadu broke into the top five, welcoming $2.9 billion in FDI from April to December 2024, a growth of 71 per cent YoY. It has overtaken Telangana in the process.
Traditionally, the top five states in FDI inflows have remained steady, Paras Jasrai, senior economic analyst, India Ratings & Research, said. “It is a function of aspects like industrialisation, technology investments, ports connectivity, and other infrastructure aspects that decide these toppers,” he noted. The order may change depending on certain factors that year and is broadly an indicator of policy environment and investor confidence, he notes.
However, analysts also caution that the methodology for State-wise accounting of FDI is unclear and depends on the headquarters of the foreign enterprise. Comments.
