India’s Net FDI Plummets 96.5% in FY25, Lowest on Record

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India’s Net FDI Plummets 96.5% in FY25, Lowest on Record

India’s net foreign direct investment (FDI) experienced a dramatic 96.5% decline in fiscal year 2025, marking the lowest level on record. The Reserve Bank of India (RBI) reported that net FDI fell to just $353 million in FY25, a stark contrast to the $10 billion recorded in the previous fiscal year.

The central bank attributed the sharp drop to a combination of increased outward FDI and the repatriation of capital by foreign investors. ‘Net FDI moderated, reflecting the rise in net outward FDI and repatriation FDI,’ the RBI stated in its monthly bulletin.

While gross FDI inflows rose 13.7% to $81 billion in FY25, a significant portion of this increase was offset by outflows, particularly from long-term investors through major initial public offerings (IPOs). Foreign investors withdrew $49 billion during the year, up from $41 billion in FY24.

IPO Boom Fuels Record Exits

  • The steep decline in net FDI coincided with a strong performance in India’s capital markets, prompting investors to realize gains. Private equity and venture capital funds, including Alpha Wave Global and Partners Group, achieved multi-billion-dollar exits in companies such as Swiggy and Vishal Mega Mart.
  • A report by the Indian Venture Capital and Alternate Capital Association (IVCA) and EY indicated that PE/VC exits totaled $26.7 billion in FY25, a 7% increase from the previous year. The report highlighted the growing trend of open market exits and PE-backed IPOs amid rising valuations and positive investor sentiment.
  • Notable exits included those from Hyundai Motor India, which raised Rs 27,870 crore as the parent company reduced its stake from 100% to 82.5%, and a key foreign investor in Swiggy securing over $2 billion from its share sale.
  • Telecom major Singtel sold part of its holding in Airtel, and British American Tobacco (BAT) exited a stake in ITC, contributing to the overall repatriation figures.

India’s benchmark stock indices reached record highs in late September 2024, triggering a wave of IPOs and creating an environment conducive to exits for early-stage and institutional investors.

A Sign of Market Maturity

Analysts see the trend not as a weakness but as an indication of a more mature investment ecosystem. ‘The ability to attract, retain, and smoothly exit capital reflects positively on the maturity of Indian markets,’ the IVCA-EY report stated.

The RBI also noted that while net FDI dropped, gross FDI remained concentrated in core sectors such as manufacturing, financial services, energy, and communications, which accounted for more than 60% of total inflows.

India Inc Expands Abroad

In parallel, Indian companies continued to invest heavily overseas. Outward direct investments surged to $29 billion in FY25 from $17 billion in FY24, reflecting corporate India’s growing global ambitions amid a realignment of global supply chains.

‘Indian companies are increasingly looking outward to tap global markets, build scale, and diversify supply bases,’ said an economist tracking the trend.

Portfolio Flows Outpace FDI

Adding to the shift in capital dynamics, net portfolio investments, considered more volatile, stood at $2.67 billion in FY25, more than six times the net FDI figure. The RBI noted that this marked a rare instance where traditionally ‘stable’ FDI was outpaced by ‘hot money’ portfolio flows.

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