RBI: Net FDI declines by 96.5 % in 2024- 25 as Indian Market Matures

According to the Reserve Bank of India (RBI), the country's net foreign direct investment (FDI) declined by 96.5 % to  $353 million in 2024-25 compared to 2023-24. According to the RBI, the steep decline in net FDI in fiscal year 2024-25 is not a cause for alarm but reflects the increasing maturity of the Indian financial market and a robust capital market.

What is Net FDI?

Net FDI refers to the total gross FDI inflow in the country minus the outflow of FDI from India in a fiscal year.

The outflow of FDI refers to the overseas investment by Indian companies and foreign investors' repatriation of profits/disinvestment from India.

FDI Data for 2024-25 

• According to the RBI, the total gross FDI in 2024-25 was $81.043 billion, a growth of 13.7 % compared to 2023-24.
• The total gross FDI in 2023-24 was $ 71.279 billion.
• Net FDI in 2024-25 was $353 million compared to $10.129 billion in 2023-24.

Break-up of Outward FDI in 2024-25 

• Repartition of profits and disinvestment by foreign investor - $51.489 billion 
• Outward FDI by Indian companies - $ 29.201 billion.

Source of FDI in 2024-25 

• According to the RBI, over 60 per cent of gross FDI inflows in 2024-25 were in manufacturing, financial services, electricity and other energy, and communication services sectors.
• Source of FDI - Singapore, Mauritius, the United Arab Emirates, the Netherlands, and the United States accounted for more than 75 per cent of the FDI.

Reason for decline in net FDI in 2024-25 

According to the RBI, the following were the main reasons for the decline in net FDI during the 2024-25 fiscal year.

Increased Repatriation by Foreign Investors 

During 2024-25, many foreign investors divested their Indian operations through initial public offerings (IPO).

During its IPO, South Korean company Hyundai sold a 17.5 % stake in Hyundai Motors India and repatriated Rs 27,870 crore back to South Korea. It still holds an 82.5% stake in Hyundai Motors India Limited.

Foreign VCF sold their stake in Swiggy worth $2 billion through the IPO. Singtel sold its stake in Airtel; BAT sold its stake in ITC, etc.

According to the Indian Venture Capital and Alternate Capital Association and EY, foreign VCF/PE sold $26.7 billion stake in their indian companies and repatriated it to their home countries in 2024-25.

Outward FDI by Indian Companies

• The overseas investment by Indian companies in 2024-25 was $29.2 billion, compared to $16.7 billion in 2023-24.
• Singapore, the United States of America, the United Arab Emirates, Mauritius and the Netherlands accounted for more than half of the outward FDI.
• Financial, banking, and insurance services, manufacturing, wholesale, retail trade, restaurants, and hotels accounted for more than 90 per cent of outward FDI.

What is FDI? 

According to the Foreign Exchange Management Act (FEMA) of 1999, foreign direct investment (FDI) means an investment made by foreign investors in;

• An unlisted Indian company or 
• Holds 10 % or more paid-up equity capital of a listed Indian company.