India’s net foreign direct investment (FDI) plunged 96.5% in FY25 to a record low of $353 million, according to RBI data, down from $10 billion in the previous year. The steep drop was fueled by foreign investor exits from high-profile IPOs and surging outward investments by Indian companies.
IPO Boom Triggers Capital Repatriation
India’s strong capital markets led to an IPO surge, with foreign investors cashing out to lock in gains. Major exits included:
- Hyundai Motor India: Rs 27,870 crore raised as the parent offloaded part of its stake.
- Swiggy: Over $2 billion repatriated by a key foreign investor.
- Singtel and British American Tobacco: Exits from Airtel and ITC, respectively.
The PE/VC community also made significant exits, with $26.7 billion withdrawn in FY25, up 7% from the previous year, according to an IVCA-EY report.
Gross FDI Still Strong
Despite the record net drop, gross FDI inflows rose 13.7% to $81 billion. Core sectors like manufacturing, energy, communications, and financial services attracted over 60% of total FDI. However, $49 billion in repatriated capital neutralized these gains.
Indian Firms Look Abroad
Indian companies are expanding globally, reflecting growing international ambitions and a response to shifting global supply chains. Outward FDI surged to $29 billion in FY25, up from $17 billion in FY24. Economists note that this signifies a confident and outward-looking India Inc.
Portfolio Flows Surpass FDI
In a rare shift, portfolio investments—traditionally more volatile—outpaced net FDI, reaching $2.67 billion in FY25. This reflects a changing capital dynamic, where India attracts quick, market-driven capital alongside long-term investments.
Analysts: A Sign of Market Maturity
Far from indicating weakness, experts suggest this trend marks a maturing investment environment. “The ability to attract, retain, and smoothly exit capital reflects positively on India’s financial markets,” the IVCA-EY report stated.
While the net FDI figure is concerning at face value, India’s resilient gross inflows, IPO success, and outbound corporate growth highlight a nuanced and evolving capital landscape—one that balances domestic strength with global reach.
