India may still be attracting billions of dollars in foreign direct investment (FDI), but a closer look at the numbers tells a more nuanced story.
A written reply by the Union finance ministry in the Rajya Sabha to a question raised by CPI(M) MP Dr John Brittas reveals that India’s net FDI has collapsed over the past three financial years. This is despite the government continuing to highlight robust gross FDI inflows.
Gross FDI refers to the total foreign investment entering the country. However, economists often consider net FDI a more meaningful indicator because it reflects how much investment actually remains in India after foreign companies repatriate profits, disinvest, or withdraw capital.
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According to the finance ministry’s reply, India’s net FDI stood at nearly $28 billion in 2022-23. It fell sharply to just over $10 billion in 2023-24, before plunging to $960 million in 2024-25, a decline of almost 97 per cent in just three years.
Sharp decline
There was a modest recovery in 2025-26, with net FDI rising to $6.95 billion. However, this remains barely one-fourth of the level recorded in 2022-23, indicating that the recovery has been limited. The finance ministry attributes the decline primarily to increasing capital outflows. According to the data, foreign investors have steadily taken more money out of India over the last four financial years.
FDI outflows rose from $29.35 billion in 2022-23 to $44.47 billion in 2023-24, increased further to $51.49 billion in 2024-25, and reached $54.04 billion in 2025-26.
Taken together, these figures show that foreign investors repatriated or withdrew nearly $180 billion from India over the four-year period.
Capital outflows
The government’s explanation is that these outflows reflect healthy returns on investment, with companies taking profits back to their home countries. While that may be true, the data also raises another important question.
If India continues to be one of the world’s most attractive investment destinations, why are fresh inflows increasingly being offset by money flowing out of the country?
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Normally, foreign investors repatriate profits while continuing to expand their investments. However, the widening gap between gross FDI and net FDI suggests that new investments are increasingly being cancelled out by capital exiting India.
As highlighted in the video, “Net FDI is what actually stays in the country after foreign investors take money back through repatriation, disinvestment and other outflows.”
Kerala’s performance
The Rajya Sabha reply also contains state-wise FDI equity inflow data that challenges a commonly repeated political narrative regarding Kerala’s investment climate.
According to the finance ministry’s figures, Kerala attracted more FDI than Madhya Pradesh and Punjab during the last four years. In three out of the last four years, Kerala also received more FDI than West Bengal, while its performance was comparable to Andhra Pradesh during the same period.
Sector-wise trends
The data also highlights the sectors that continue to attract foreign investment.
The services sector remained the largest recipient of FDI in 2025-26, attracting more than $10 billion. Computer software and hardware witnessed a sharp rise to nearly $14 billion, while food processing also registered significant growth.
Among states, Maharashtra continued to lead in attracting FDI, followed by Karnataka, Gujarat, and Delhi. Tamil Nadu and Haryana also recorded notable gains during the period.
Key takeaway
So, then what’s the key takeaway from the finance ministry’s data? This data shows that India continues to attract substantial gross FDI, however, an increasing share of that investment is flowing back out of the country, resulting in a dramatic decline in net FDI.
For policymakers, economists and investors, net FDI may be the more important indicator to watch because it reflects not just how much money enters India, but how much of that investment remains in the country over time.
In conclusion, the net FDI tells us not just how much money comes to India, but how much confidence remains here.