There has been a jump in foreign direct investment (FDI) entering India through the government approval route in the April-June period of the current fiscal year, with most of it flowing through Cyprus. The quarter also saw a dip in overseas flows for acquiring existing shares of companies.
The FDI through the government route was up more than five-fold in April-June as compared to year-ago and touched $ 1.36 billion. In April-June of 2024 only $ 209 million came through the government approval route while in January-March of 2025 it stood at $ 360 million, according to an analysis by the commerce and industry ministry
Almost all sectors of the economy have rules that allow FDI through automatic route. Only in some strategic sectors like atomic energy and defence require prior government approval. In sectors like banking, insurance, telecom, pharma and parts of aviation the approval of the government is required if the stake of foreign investors crosses a threshold. The threshold differs across sectors.
Even FDI from countries facing land borders with India – China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar and Afghanistan – have to go through a government approval route. In April-June FDI from China was a measly 0.03 million.
The FDI for acquisition of existing shares of companies in India, fell 11.2% on year to $3.73 billion in April-June,. However, when compared to January-March it more than doubled. In April-June of last year $ 4.2 billion came for acquisition of existing shares and in January-March of 2025 this number fell to $ 1.67 billion.
Other than indicating muted merger and acquisition activity in the first quarter of this financial year, it also tallies with the increasing visible trend of exits in companies happening through other means like Initial Public Offer (IPO) and not only other foreign investors replacing existing investors.
Most of the FDI came through the automatic route. In April-June of this financial year $ 13,52 billion came through this route while in the same period of last year this number stood at $ 11.76 billion and $ 7.31 billion in January-March of this year.
Overall FDI equity flows in April-June were up 15% on year to $ 18.62 billion. In January March the FDI enquiry inflows were $ 9.34 billion.