1.India's FDI Net Decline (Foreign Direct Investment)

What & Where
Foreign Direct Investment (FDI): ≥10 % equity stake by a non-resident, conferring control/management rights.
Routes & Forms: Automatic vs Government approval; equity infusion, reinvested earnings, intra-company loans.
Core Sources FY 24-25: Singapore (~15 %), Mauritius (~10 %), reflecting financial-centre dominance.
Quick Facts for MCQs
Trends & Numbers
- Net-FDI collapsed: USD 44 bn (2020-21) ➜ USD 0.4 bn (2024-25).
- Disinvestments ballooned: <1 % early-2000s ➜ 63.5 % of gross inflow now.
- Outward-FDI surged to USD 29.2 bn, nearly tripling within five years.
Structural Issues
- Concentration: Singapore & Mauritius flows suggest round-tripping, low real-sector linkage.
- Sectoral slide: Manufacturing share just 12 %; computer services see withdrawals.
- Data mismatch: UNCTAD figures 60 % below RBI, hinting possible overstatement.
Policy Toolkit
- Stability: Transparent, predictable FDI regime to retain long-term investors.
- Quality push: Prioritise manufacturing, green tech, R&D via targeted incentives.
- Treaty rationalisation: Curb tax-haven routing; institute sector-wise outcome monitoring.
Key Data Points
| Feature | Data-Point |
|---|---|
| Gross FDI inflow growth FY 24-25 | 13.7 % |
| Net FDI FY 24-25 | USD 0.4 bn |
| Net FDI FY 20-21 (peak) | USD 44 bn |
| Avg gross inflow growth, last 4 yrs | 0.3 % p.a. |
| Repatriation growth post-pandemic | 18.9 % p.a. |
| Disinvestments share in gross FDI | 63.5 % |
| Manufacturing FDI share FY 24-25 | 12 % |
| Outward FDI FY 24-25 | USD 29.2 bn |
| Outward FDI rise in 5 yrs | ~3× |
| UNCTAD vs RBI FDI gap | up to 60 % lower |
Related UPSC Prelims PYQs
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
According to the Reserve Bank of India’s report, which two countries together accounted for over one-third of the total FDI in India?








