Foreign Direct Investment (FDI) inflows into India have surpassed the $1 trillion mark during the period from April 2000 to September 2024, solidifying the country's status as a prominent and secure global investment hub.

Data from the Department for Promotion of Industry and Internal Trade (DPIIT) reveals that the total FDI, encompassing equity, reinvested earnings, and other capital, reached $1,033.40 billion over this timeframe.

Approximately 25% of these inflows originated from Mauritius, making it the largest contributor. Singapore followed closely with 24%, while the United States accounted for 10%. Other significant sources included the Netherlands (7%), Japan (6%), the United Kingdom (5%), and the UAE (3%). Smaller contributions came from the Cayman Islands, Germany, and Cyprus, each contributing 2%.

During the review period, India received $177.18 billion in FDI from Mauritius, $167.47 billion from Singapore, and $67.8 billion from the United States, according to official data.

The sectors that garnered the highest inflows included services, computer software and hardware, telecommunications, trading, construction development, automobiles, chemicals, and pharmaceuticals.

FDI Boom: India's Growth and What's Next

The Commerce and Industry Ministry highlighted that from 2014 to 2024, India attracted a total FDI inflow of $667.4 billion, marking a 119% growth compared to the previous decade (2004-2014).

This investment covers 31 states and 57 sectors, fostering growth across various industries. Notably, most sectors-apart from those deemed strategically significant-permit up to 100% FDI under the automatic approval route.

India can sustain its position as a prime FDI destination by enhancing ease of doing business, strengthening infrastructure, and offering sector-specific incentives. Simplifying regulations and ensuring transparent governance are vital to attracting investors. Focusing on emerging sectors like renewable energy, AI, and green technologies while aligning with global ESG standards can boost confidence. Expanding trade agreements and promoting initiatives like Make in India can position India as a manufacturing and export hub.

Foreign investments into India are expected to gain further traction in 2025, driven by robust macroeconomic indicators, improved industrial performance, and appealing Production Linked Incentive (PLI) schemes, according to experts.

They emphasized that despite global uncertainties, India continues to be a favoured destination for international investors.

Navigating Investment Routes and Restrictions: FDI Regulatory Landscape

Rumki Majumdar, an economist at Deloitte India, stated that FDI inflows are expected to remain moderate due to anticipated policy shifts in the US and the effects of policy stimulus on China's economy.

She highlighted that geopolitical developments could disrupt supply chains, and trade regulations might dampen investor confidence, resulting in volatile capital flows. To address this, she emphasized the need for the government to focus on infrastructure investments with timely project execution, enhance workforce skills through public-private partnerships (PPPs) and incentives, invest in digital ecosystems to boost productivity, and support R&D for digital innovations that promote inclusion and economic formalization.

FDI is permitted through the automatic route in most sectors, but government approval is needed for foreign investments in areas such as telecom, media, pharmaceuticals, and insurance.

Under the government approval route, foreign investors must obtain prior approval from the relevant ministry or department. In contrast, under the automatic route, overseas investors only need to inform the Reserve Bank of India (RBI) after making the investment.

Currently, FDI is prohibited in certain sectors, including lottery, gambling, betting, chit funds, Nidhi companies, real estate, and the manufacturing of cigars, cheroots, cigarillos, and cigarettes using tobacco.