India's Net Foreign Direct Investment Plummets by 96.5% to Reach Record Low

New Delhi: India's net foreign direct investment (FDI) plummeted 96.5% to a record low of $353 million in fiscal year 2025, down sharply from $10 billion the previous year. The Reserve Bank of India (RBI), in its latest monthly bulletin released on Wednesday (May 21), attributed the drop to large fund repatriations as investors exited through profitable initial public offerings (IPOs) and as Indian firms increased their investments overseas.

A hot IPO market, featuring companies like Hyundai Motor and Swiggy, allowed long-term investors to realise significant gains. Simultaneously, Indian companies stepped up investments abroad to capitalise on shifts in global supply chains. The RBI stated that "Net FDI moderated…reflecting the rise in net outward FDI and repatriation FDI."

This decline in net FDI – the difference between gross FDI inflows and both outward investments by Indian companies and funds taken out by foreign entities – occurred despite a strong rise in gross FDI.

Investors withdrew $49 billion from India in FY25, an increase from $41 billion the year before. High-profile exits included those by Alpha Wave Global and Partners Group from major share sales like Swiggy and Vishal Mega Mart.

A report by the Indian Venture Capital and Alternate Capital Association (IVCA) and EY highlighted that private equity and venture capital exits totaled $26.7 billion, a 7% year-on-year increase. Open market exits were dominant, though IPOs backed by private equity gained momentum. For example, Hyundai’s promoters took home proceeds from its Rs 27,870 crore listing as it reduced its stake. 

A key Swiggy investor reportedly made over $2 billion post-IPO. Telecom firm Singtel’s sale of its Airtel stake and tobacco company BAT’s divestment from ITC in March 2024 also likely contributed to the FY25 repatriation figures. These large IPOs often coincided with India's stock market indices hitting record highs, such as the surge in late September of last year.

Despite the drop in net figures, some see these trends positively. The IVCA/EY report suggested this activity signals a "mature market," where foreign investors can smoothly enter and exit, which "reflects positively on the Indian economy."

Furthermore, gross inward FDI showed robust growth, rising 13.7% to $81 billion in 2024-25, according to RBI data. The central bank noted this investment remains concentrated, with over 60% flowing into manufacturing, financial services, electricity and energy, and communication services. Net inflows of ‘stable’ FDI were 86% lower than the $2.67 billion in ‘volatile’ portfolio flows for the year.

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