India’s net FDI nosedives 62% to $10.6 bn in FY24: RBI

Net foreign direct investment (FDI) in India, which is the difference between inflows and outflows, plummeted by 62.14% to $10.6 billion in the financial year ending March 31, 2024 (FY24), from $28 billion the previous year, according to Reserve Bank of India (RBI). This marks the lowest level of net FDI since 2007, largely due to increased repatriation of capital.

Gross inward FDI remained stable at $71.0 billion in 2023-24 compared to $71.4 billion in FY23, according to provisional data from the RBI. The apex bank reported that FDI inflows were $26.55 billion and outflows were $15.96 billion in FY24, whereas in FY23, inflows were $42.0 billion and outflows were $14.02 billion. Repatriation and disinvestment by direct investors in India surged to $44.40 billion in FY24 from $29.34 billion in FY23.

The RBI in its May 2024 bulletin highlights that over 60% of FDI equity flows were directed towards sectors such as manufacturing, electricity and other energy, computer services, financial services, and retail and wholesale trade. Major contributors to these flows were Singapore, Mauritius, the US, the Netherlands, Japan, and the UAE, accounting for over 80% of the total flows.

Global FDI flows have been affected by rising borrowing costs, increasing geopolitical fragmentation, and growing protectionism in recent years. Despite these challenges, India remains among the top 10 economies expected to witness significant FDI momentum in 2024, according to fDi Intelligence, which reviews global investment activity.

Since the COVID-19 pandemic, there has been a structural shift in global investment patterns, with FDI flows moving from developed to developing economies. The share of global FDI capital expenditure originating from G20 emerging markets rose to 14.9% in 2023 from 8.2% in 2003. Additionally, Indian companies announced over 550 greenfield FDI projects abroad in 2023, the highest number ever recorded, according to the RBI report.

In April 2024, foreign portfolio investors (FPIs) became net sellers in Indian capital markets after two months, amidst uncertain global signals including escalating geopolitical tensions, increasing commodity prices, and rising US bond yields.

In April 2024, Indian equities saw net outflows of $1.1 billion, in line with trends in other emerging markets. The information technology (IT) and financial services sectors experienced the highest outflows, whereas the telecommunications and power sectors attracted the most equity inflows. By May 2024, net FPI outflows had increased to $3.4 billion.