India witnessed a steep decline in net foreign direct investment (FDI) in May 2025, with the figure plummeting by 98% year-on-year to just $35 million, according to the Reserve Bank of India’s (RBI) latest monthly bulletin. The sharp drop comes amid a fall in gross inflows and a surge in repatriation by overseas investors.
Gross FDI inflows into the country fell by 11% year-on-year to $7.2 billion in May. At the same time, repatriation of FDI jumped nearly 24%, reaching $5 billion, signalling growing investor caution and profit-taking. Compared to April 2025, net FDI was down 99%, underlining the sharp volatility in investment sentiment.
Experts note that such a fall in net FDI, considered a stable and long-term source of foreign capital, raises concerns about India’s ability to attract and retain strategic global investment.
Key source countries and sectors
The RBI reported that four countries—Singapore, Mauritius, the UAE, and the United States—accounted for over 75% of total FDI inflows during May. On the sectoral front, manufacturing, financial services, and computer services emerged as the leading recipients of FDI.
Meanwhile, outward FDI, Indian investments abroad, rose to $2.1 billion from $1.8 billion in May 2024. Key sectors included transport, storage and communication, manufacturing, and financial, insurance and business services. Top destinations for Indian investments were Mauritius, the US and the UAE.
Forex reserves remain robust despite FDI slump
In contrast to the FDI data, net portfolio investments in May stood at $1.6 billion, marking a reversal from net outflows in the same period last year and in April 2025. While portfolio flows are more volatile in nature, this upturn helped buffer the impact of the FDI downturn to some extent.
Despite the sharp drop in net FDI, India’s foreign exchange reserves remain strong at $696.7 billion. The current level is sufficient to cover over 11 months of imports and around 95% of India’s external debt as of March 2025.
Economists stress the importance of boosting long-term FDI to reduce dependence on more unpredictable sources like portfolio flows and to maintain economic stability amidst global uncertainty.