India FDI FY25: Record Gross Inflows but Net FDI Near Zero
Why in the news
RBI Bulletin figures reveal a wide gap between record gross FDI and almost nil net FDI, pointing to heavy outflows and exits.
| Indicator | FY21 | FY25 |
|---|---|---|
| Gross FDI-to-GDP | 3.1% | 2.1% |
| Net FDI-to-GDP | 1.6% | 0% |
Key facts
- Outward FDI: Indian firms investing abroad for technology, markets or tax arbitrage via Mauritius and Singapore.
- Disinvestment: foreign capital exiting, often in stock market booms.
- PE/VC deals are mostly brownfield (fintech, real estate, healthcare, retail, insurance); examples: Blackstone in Care Hospitals, ChrysCapital in Lenskart.
Concerns
- Blanchard and Acalin (2016) ranked India 6th among 25 EMEs on linked inward and outward FDI, hinting at hot money and treaty shopping.
- Fewer greenfield projects mean less new capacity; FDI’s share in capital formation is small.
Way forward
- Favour tech-intensive, long-term capital; curb tax-arbitrage flows; match FDI to industrial policy.
Exam angle
- Source: RBI Bulletin; terms: net FDI, OFDI, brownfield, greenfield.