We have closely analysed India’s Foreign Direct Investment (FDI) ecosystem, drawing on comprehensive data from official sources such as the Reserve Bank of India (RBI) and the Department for Promotion of Industry and Internal Trade (DPIIT). India’s FDI inflows reflect a story of resilience and innovation amid global uncertainties, with a pronounced emphasis on unlisted companies and startups. Governed by the Foreign Exchange Management Act (FEMA), FDI primarily targets unlisted firms or stakes of 10% or more in listed entities. This framework has channeled 70-80% of inflows toward unlisted entities, including startups and greenfield projects, positioning India as a hub for digital and high-tech investments.
Sectoral Distribution: A Skew Toward Services And Technology
India’s FDI inflows exhibit a clear sectoral hierarchy, highlighting investor preferences for import oriented assembling sectors. In FY 2024-25, assembly hub of India emerged as the top recipient, attracting 23% of total equity FDI inflows, amounting to $19.04 billion—a robust 18% year-on-year (YoY) increase. This surge underscores the sector’s appeal, due to increasing joint ventures (JVs) in electronics, automobiles, and pharmaceuticals assembling sectors of India.
The services sector followed closely, capturing 19% of inflows, up from 16% in FY 2023-24. Within services, fintech and AI dominate, absorbing a significant portion of capital for platform scaling and innovation. Computer software and hardware accounted for 16%, while trading contributed 8%.
In contrast, agriculture and related activities received less than 1% of inflows, around $0.2-0.3 billion annually, despite 100% FDI allowance under the automatic route for areas like floriculture, horticulture, and seed production. This limited interest stems from policy restrictions in certain sub-sectors and a broader focus on urban, tech-driven opportunities.
Over 97% of direct investment entities are unlisted, with FDI into Indian startups representing 9-12% of total inflows in 2024 (approximately $7-10 billion out of $81 billion). This concentration in unlisted firms, particularly in services and technology, signals strong investor interest in India’s tech sphere. However, it also highlights an imbalance: traditional sectors like manufacturing and agriculture, while showing absolute growth, lag in relative terms. This skew could constrain broader economic benefits, such as job creation in rural areas and supply chain resilience. To address this, targeted reforms—such as enhanced incentives for agro-processing and sustainable farming technologies—could diversify FDI and promote inclusive growth.
Gross And Net FDI Trends In Unlisted And Listed Segments
India’s FDI performance from FY 2023-24 to the first half of FY 2025-26 demonstrates sustained appeal despite global headwinds. Gross inflows, which measure raw investor interest, have trended upward:
(a) FY 2023-24: $71.28 billion, with 75% ($53.46 billion) directed to unlisted firms and 25% ($17.82 billion) to listed entities. Key drivers included equity surges in services and manufacturing, supported by policy easing.
(b) FY 2024-25: Increased 14% to $81.04 billion, maintaining the 75% unlisted and 25% listed split ($60.78 billion and $20.26 billion, respectively). Momentum in fintech and AI fueled this growth.
(c) H1 FY 2025-26 (April-September 2025): Preliminary figures reached $37.5 billion, with 80% ($30 billion) in unlisted firms, reflecting a 47% YoY rise in Q1 alone.
Net FDI, calculated as gross inflows minus repatriations, disinvestments, and outward FDI, provides insight into capital retention:
(a) FY 2023-24: +$10.2 billion, with unlisted firms at +$7.65 billion (75%) and listed at +$2.55 billion (25%).
(b) FY 2024-25: Dipped to +$0.35 billion due to record repatriations ($51.5 billion) and outward FDI ($28.2 billion), affecting unlisted sectors ($0.26 billion retention) more significantly.
(c) H1 FY 2025-26: +$10.8 billion, with unlisted at +$8.1 billion (75%) and listed at +$2.7 billion (25%). Partial figures show net FDI at $3.9 billion for April 2025 alone (driven by lower repatriations). No Q2 or H1 aggregate is available, making this +$10.8 billion figure speculative.
The dominance of unlisted firms—accounting for 75% of both gross and net FDI annually—indicates strategic bets on private high-growth entities. Yet, it underscores the need to bolster public markets and diversify investments to mitigate risks from sector-specific volatility.
| Period | Startups/Unlisted Share (%) | Listed Share (%) | Services Share (%) | Tech Share (%) | Other Share (%) | Yearly % Change in Gross FDI | Reasons for Change |
|---|---|---|---|---|---|---|---|
| FY 2023-24 | 75 | 25 | 19 | ~15 | ~66 | N/A | Equity surges in services/manufacturing, policy easing. |
| FY 2024-25 | 75 | 25 | 19 | ~15 | ~66 | +14% | Fintech/AI momentum, global recovery; net impacted by repatriations/outward FDI. |
| H1 FY 2025-26 | 80 | 20 | 19 | ~18 | ~63 | +~48% annualized | Tech rebound, Q1 up 47%. |
Assembling Sector: PLI-Driven Growth And Net FDI Status
Assembling sector FDI trajectory from 2023 to 2025 highlights its role as a cornerstone of India’s economic strategy. Gross equity inflows grew from $16.12 billion in FY 2023-24 to $19.04 billion in FY 2024-25, with $8-9 billion in the partial FY 2025-26 (April-July 2025). This sector predominantly flows into unlisted companies or greenfield projects (70-80% share), with listed firms benefiting from acquisitions.
Net FDI in assembling, while influenced by economy-wide repatriations, remained positive: approximately $3-4 billion in FY 2023-24, $2-3 billion in FY 2024-25, and $2-3 billion in partial FY 2025-26. Growth is linked to PLI schemes, which have attracted JVs in electronics, pharmaceuticals, and chemicals, contributing to many jobs.
Approximately 60-70% of assembling FDI from 2023 to 2025 involved JVs availing PLI incentives, while 30-40% stemmed from non-PLI dealings. PLI sectors like electronics (e.g., Apple suppliers) exemplify this, with JVs meeting local production targets for 4-6% incentives on incremental sales. Non-PLI FDI focuses on sub-sectors like steel and textiles, driven by market access.
Startup Ecosystem: Funding, Utilisation, And Challenges
India’s startup ecosystem has absorbed $33.9 billion in FDI and VC inflows from 2023 to 2025, with total funding rebounding from $9.8 billion in 2023 to $13.7 billion in 2024, and $10.4 billion in January-September 2025 (projecting $15 billion for the year). FDI constitutes 70-75% of this, sourced mainly from Singapore, the US, Mauritius, the Netherlands, and Japan.
Challenges Persist: Over 70 startups have reverse-flipped back to India since 2023 (e.g., Flipkart, Zepto, PhonePe), driven by IPO opportunities and tax incentives, reversing earlier outward trends (now 10-20 cases annually). Closures totaled 15,921 in 2023, 12,717 in 2024, and 500-1,000 in 2025, often due to funding shortages and compliance. Among funded entities, 20-25 lost unicorn status (e.g., Byju’s, PharmEasy, Dream11), with 16 in 2025 alone, linked to regulatory changes like gaming taxes.
| Category | Number (2023-2025) | Examples | Key Reasons |
|---|---|---|---|
| Lost Unicorn Status | ~20-25 | Byju’s, Hike, PharmEasy, Dream11, Games24x7, Paytm Mall | Regulatory changes, valuation resets, investor pullback. |
| Closures (Among Flippers/Funded) | ~5-10 | Hike, select gaming firms | Market shifts, compliance burdens; reverse flips often averted closure. |
Comparative Global FDI: India vs. Key Economies
India’s emphasis on unlisted firms and startups in FDI sets it apart from peers, who often prioritise finance and manufacturing. Amid a global FDI decline of 11% to $1.5 trillion in 2024, China and Japan faced sharp downturns due to geopolitical tensions and economic pressures, while Singapore and Hong Kong benefited from diversification and hub status. The United States saw a rebound, driven by tech booms and incentives.
The table below provides a detailed comparison of gross and net FDI trends across key economies, highlighting sectoral focuses and underlying reasons for changes. India’s consistent growth contrasts with declines in some peers, underscoring the effectiveness of policy reforms in attracting long-term capital.
| Country | Gross Inflows 2023 ($B) | Gross Inflows 2024 ($B) | Gross Inflows 2025 Partial ($B) | % Change Gross 2023-2024 | Net FDI 2023 ($B) | Net FDI 2024 ($B) | Net FDI 2025 Partial ($B) | % Change Net 2023-2024 | Key Sectors (Top Shares) | Reasons for Positive/Negative Changes |
|---|---|---|---|---|---|---|---|---|---|---|
| China | 163.3 | 116.2 | Jan-Jul: ~65.4 | -28.8% | -14.0 | -46.5 | Jan-Jul: ~-20 | -232% | Manufacturing (40%), high-tech (20%) | Negative: Geopolitics, US decoupling, property issues. |
| United States | 233.1 | 278.8 | Q1: 52.8 | +19.6% | -127.3 | +12.5 | Q1: ~10 | +110% | Manufacturing (45%), finance (15%) | Positive: Tech booms, incentives; net turnaround. |
| Pakistan | 2.05 | 2.57 | Jul-Feb FY25: 1.62 | +25.4% | +2.0 | +2.4 | Jul-Feb FY25: ~1.6 | +20% | Oil & gas (24%), financial (12%) | Positive: Infrastructure, IMF support. |
| Japan | 20.8 | 13.4 | H1: ~2.6 | -35.9% | -175.9 | -191.0 | N/A | -8.6% | Semiconductors, data centers | Negative: Yen depreciation, outflows. |
| Hong Kong | 112.6 | 117.0 | Q2: ~20 | +4.0% | +25.8 | +38.9 | Q2: ~5 | +51% | Finance/real estate (~50%) | Positive: Hub status, stability. |
| Singapore | 148.8 | 175.2 | Q2: 55.0 | +17.8% | +72.1 | +88.1 | H1: ~90 | +22% | Finance/tech (20%) | Positive: Diversification from China. |
Looking Ahead: Toward Inclusive And Sustainable Growth
India’s FDI landscape, as illuminated through detailed analysis of RBI and DPIIT data, paints a portrait of a dynamic economy navigating global challenges with a strong tilt toward innovation, technology, and unlisted enterprises. From the resilient gross inflows surging to $81.04 billion in FY 2024-25—predominantly channeled into unlisted firms and startups comprising 70-80% of investments—to the sectoral dominance of assembly (23%), services (19%), and tech-driven segments like fintech and AI, the narrative underscores India’s emergence as a digital powerhouse. Yet, this concentration reveals stark imbalances: traditional sectors such as agriculture and manufacturing receive minimal shares, limiting broader socioeconomic benefits like rural job creation and supply chain diversification, while net FDI fluctuations, influenced by repatriations and outward flows, highlight vulnerabilities in capital retention despite positive trends in unlisted segments.
The assembling sector’s PLI-fueled growth, attracting $19.04 billion in FY 2024-25 through joint ventures in electronics and pharmaceuticals, exemplifies strategic policy successes, contributing to employment and greenfield projects. Similarly, the startup ecosystem’s $33.9 billion in FDI and VC inflows from 2023-2025, sourced from hubs like Singapore and the US, reflects robust investor confidence, tempered by challenges including closures (over 15,000 in 2023 alone), lost unicorn status for 20-25 entities amid regulatory shifts, and reverse flips signaling maturing domestic opportunities. Globally, India’s upward trajectory contrasts sharply with declines in peers like China (-28.8% gross inflows in 2024) and Japan (-35.9%), driven by India’s policy easing, tech rebounds, and diversification from geopolitically strained economies, while aligning with rebounds in the US and hubs like Singapore.
Moving forward, harnessing this momentum demands targeted reforms to broaden FDI’s reach: incentivising agro-processing, sustainable technologies, and public market investments to foster inclusive growth, mitigate sectoral volatility, and ensure equitable distribution of economic gains. By addressing these imperatives, India can solidify its position as a resilient, innovative force in the global FDI arena, translating inflows into sustainable development for all segments of society.