Fall in Net FDI

Prelims: Economic and Social Development| Current events of national and international importance.

Why in News?

Recent data released in RBI reveals that Net FDI into India fell by over 96% to $353 million in 2024–25 from $10.1 billion in 2023–24.

• Foreign direct investment (FDI) – It refers to an ownership stake in a foreign company or project made by an investor, company, or government from another country.
• FDI investors typically take controlling positions in domestic firms or joint ventures and are actively involved in their management.
• Top sector-wise Gross FDI Inflows for 2024–25
  • Manufacturing
  • Financial services
  • Electricity and energy
  • Communication services
• Top countries contributing to India’s Gross FDI
  • Singapore
  • Mauritius
  • UAE
  • Netherlands
  • USA
• OFDI (Outward Foreign Direct Investment) - It refers to investments made by Indian companies in foreign countries — through acquisitions, establishing subsidiaries, joint ventures, or branches.
• In 2024–25 over $29.2 billion were invested abroad by Indian companies.
• Indian OFDI mainly into Singapore, USA, UAE, Mauritius, Netherlands.
• Net FDI – It is the difference between Gross FDI and Outward direct investments by Indian firms and repatriation by overseas entities.
• Net FDI = Gross FDI inflows − (OFDI by Indian firms +Repatriation by foreign firms)

Repatriation refers to the profits, dividends, or capital from foreign companies gained from India that were sent back to their home countries.

• Net FDI reflects the net capital retained within India after outflows.

Reason for fall in net FDI Fall

• Highest Repatriation - $51.5 billion repatriated in 2024–25 which is the highest in last decade.
• Rise in OFDI - Indian firms invested $29.2 billion abroad which is a 75% increase from previous year.
• Pandemic Trend – Net FDI has been consistently declining declined post-pandemic.

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Reference

The Hindu| India’s Net FD crashed by more than 96%