Late last week multiple news outlets reported that in 2024-25, gross foreign direct investment (FDI) into India hit $81 billion, up nearly 14 percent from the previous year – a stat that made headlines.

But scratch the surface, and the story isn’t so rosy. When adjusted for the size of the Indian economy, actual FDI inflows have been largely showing a downward trend. Repatriations – money pulled out by foreign direct investors – have surged, and net FDI has crashed to its lowest level in 25 years. It was at 0.01 percent of the GDP, basically zero.

Behind the glossy numbers lies a revealing truth: both foreign and Indian investors – foreigners more than Indians – are losing enthusiasm for India’s growth story. The detailed digging up of data tells a far more sobering tale.

Now take a look at the following chart which plots the gross FDI into India since 2000-01.

In absolute terms, the gross FDI into India peaked in 2021-22 at $84.8 billion, then fell for the next two years and recovered in 2024-25 to $81 billion. It also tells us that the gross FDI has largely seen an upward trend over the last 25 years.

What does this chart not tell us? While the gross FDI into India has gone up over the years, the size of the Indian economy has become bigger as well. Given this, when we look at the gross FDI numbers we should also take the increasing size of the Indian economy into account.

Once we take the size of the Indian economy into account, the gross FDI to GDP ratio in 2024-25 stood at 2.1 percent of the GDP, exactly the same as the average between 2000-01 and 2024-25.

The gross FDI to GDP ratio peaked at 3.5 percent in 2008-09, when in absolute terms it had stood at $41.9 billion. In recent years it peaked at 3.1 percent of the GDP in 2020-21, when in absolute terms it had stood at $82 billion. The higher ratio of 3.1 percent was also because of the GDP shrinking during that year due to the pandemic. In 2021-22 it was at 2.7 percent of the GDP. 

Even this chart does not give us the complete picture. Now, take a look at the following chart, which plots the foreign direct investments into India minus the repatriations.

In 2024-25, the FDI into India minus repatriations stood at $29.6 billion. How did we arrive at this number? The gross FDI into India stood at $81 billion. At the same time, the repatriations stood at $51.4 billion during the year. Once we subtract the repatriations from gross FDI, what remains is the FDI into India.

So, what does repatriation mean and why has it been going up? It basically means that a substantial part of the gains made from investing through the FDI route in India are being taken out of India, and not being reinvested in the country.

Indeed, the FDI into India has been falling over the last few years because repatriations have gone up. These repatriations had stood at $18.4 billion in 2019-20 and had jumped to $51.4 billion in 2024-25.

Why has that been the case? The Reserve Bank of India in its latest state of the economy report explains this trend by saying: “This is a sign of a mature market where foreign investors can enter and exit smoothly.”

RBI’s explanation hides more than it reveals. Increasing repatriation also means that the firms which have made foreign direct investments into India over the years and gained from the process, are now preferring not to invest a lot of those gains in India and hence, the money is being moved out of India, something that the RBI report clearly avoids saying.

Now, let’s look at FDI into India as a proportion of the GDP or the size of the Indian economy. 

The FDI into India as a proportion of GDP peaked back in 2008-09 at 3.5 percent of the GDP. In 2024-25 it stood at 0.8 percent of the GDP. It’s important to remember here that the mid to late 2000s were go-go years of the Indian economy with the country being projected as the next China, and there was barely any repatriation happening. 

A fairer comparison would be 2019-20 when this figure had stood at 2 percent of the GDP. What the fall since then clearly tells us is that substantial parts of the Indian economy are still feeling the after effects of the pandemic, impacting purchasing power of the average Indian and thus investment potential of the economy.

Now, we will look at the net FDI. This is arrived at by subtracting FDI by India – that is Indian firms investing in other countries – from FDI into India. In 2024-25, the FDI into India had stood at $29.6 billion. During the year, the FDI by India was $29.2 billion. This implies a net FDI of $0.4 billion or $400 million. The exact number is $354 million, but rounding off of numbers leads us to $400 million. 

The RBI report referred to earlier explains this as follows: “Net foreign direct investment (FDI) moderated to US$ 0.4 billion during 2024-25 from US$ 10.1 billion a year ago, reflecting the rise in net outward FDI and repatriation FDI. This is a sign of a mature market where foreign investors can enter and exit smoothly, which reflects positively on the Indian economy.”

Indian firms investing more money abroad is great. But what the net FDI number of $354 million also means is that many Indian firms – or India Inc. as the business press likes to call them – aren’t very gung ho about investing in India. And that’s something that the RBI forgot to highlight. 

Finally, let’s look at net FDI as a proportion of the GDP. 

In 2024-25, the net FDI as a proportion of the GDP stood at 0.01 percent of the GDP – the lowest it has been since net FDI data first became available in 2000-01. This massive fall might be a one off but there are other points that come out clearly out of the charts shared above.

First, FDI coming into India once adjusted for the size of the Indian economy, hasn’t really gone anywhere in a decade and a half.

Second, when CEOs and chairpersons of foreign firms come to India and talk about how important India’s huge market is for them, more often than not it’s just talk – talk that ensures that what they say makes it into the media in the hours and days to come. The revealed preference of these CEOs is clearly seen in the FDI data. Their money is not where their mouth is.

Third, when many Indian CEOs and chairpersons talk about the potential of the Indian economy, they are behaving like their foreign counterparts, though to a lesser degree. Again, their revealed preferences are different.

Finally, the headline FDI numbers may look impressive, but the deeper data tells a different story – one of rising exits, falling investor confidence and missed opportunities. When both foreign and Indian firms hesitate to bet on India’s future, it’s time to question the narrative. Glossy promises and press statements won’t drive growth – real investment will. And right now, the lack of money being invested should be speaking louder than the marketing, the propaganda and the hype around it. Sadly, it isn’t. 

Vivek Kaul is an economic commentator and a writer.

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