India's foreign direct investment hits $1 trillion since turn of century. Where did the funds come from?

India has reached a significant milestone with its Foreign Direct Investment (FDI) inflows surpassing $1 trillion since April 2000, according to data from the Department for Promotion of Industry and Internal Trade (DPIIT). This cumulative figure includes equity investments, reinvested earnings, and other capital inflows. The achievement highlights India's growing stature as a leading global investment destination.

In the first half of FY 2024-25, India attracted $42.1 billion in FDI, marking a 26% increase compared to the previous year’s corresponding period. Mauritius emerged as the largest source of FDI, contributing 25% of the total inflows, followed closely by Singapore at 24%. The United States accounted for 10%, with the Netherlands (7%), Japan (6%), and the United Kingdom (5%) also being significant investors. Other contributors include the UAE, Cayman Islands, Germany, and Cyprus, each contributing between 2% and 3%.

The services sector led FDI inflows, particularly in financial services, information technology, and consulting. Other sectors that attracted significant foreign investment included computer software and hardware, telecommunications, trading, infrastructure development, chemicals, pharmaceuticals, and automobiles. Manufacturing saw a notable increase, with a 69% rise in FDI over the past decade, driven by policy measures such as the "Make in India" initiative.

From 2014 to 2024, India received $709.84 billion in FDI, accounting for nearly 69% of the total inflows since 2000. This period saw a substantial acceleration in foreign investments, reflecting the impact of various reforms. The Ministry of Commerce and Industry emphasized the role of FDI in providing non-debt financial resources, facilitating technology transfers, and creating employment opportunities in the country.

India’s policies have facilitated a favorable investment climate, with most sectors now allowing 100% FDI through the automatic route. Under this route, foreign investors only need to inform the Reserve Bank of India after making an investment. However, sectors like telecommunications, media, insurance, and defense require government approval. India also prohibits FDI in areas such as lotteries, gambling, tobacco manufacturing, and real estate businesses.

The government has implemented various reforms to enhance India’s investment appeal, including the abolition of angel tax on startup funding and a reduction in corporate tax rates for foreign companies. These steps complement India’s competitive labor costs and its strategic position as the world’s fifth-largest economy. As of 2024, India’s GDP is estimated to be $3.89 trillion, up from $2 trillion in 2014. FDI has flowed into 60 sectors across 31 states and union territories, reflecting the broad-based nature of investment in India’s diverse economy.