Lok Sabha Question No. 408 (UNSTARRED), answered on 2025-12-02
Subject: Decline in Net FDI
Ministry: COMMERCE AND INDUSTRY
Asked by: Shri Asaduddin Owaisi

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE

## LOK SABHA

UNSTARRED QUESTION NO. 408. TO BE ANSWERED ON TUESDAY, THE 02 ND  DECEMBER, 2025.

## DECLINE IN NET FDI

## 408.   SHRI ASADUDDIN OWAISI:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state: वाणिज्य एवं उद्योग मंत्री

- (a) whether  the  Government  is  aware  of  the  decline  in  net  Foreign  Direct Investment (FDI) inflow relative to GDP, which declined from 1.6% in financial year 2020-21 to 0.2% in financial year 2024-25;
- (b) the reasons identified for the declining trend, including the role of outward FDI, taxation and changes in the composition of FDI;
- (c) whether the Government has assessed the impact of this decline on gross fixed capital formation and economic growth;
- (d) the steps taken or proposed to be taken by the Government to attract higher net FDI, particularly in sectors that enhance productive capacity and generate employment; and
- (e) whether the Government is considering reforms in investment climate, taxation policies  or  sectoral  regulations  to  reverse  this  trend  and  if  so,  the  details thereof?

## ANSWER

## वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री ( श्री णिणिन प्रसाद ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI JITIN PRASADA)

- (a) to (e): Foreign Direct Investment (FDI) is considered as a major source of non-debt financial resource for economic growth. Gross FDI flows into India have grown consistently  over  the  last  more  than  a  decade.  FDI  infuses  long  term sustainable  capital  in  the  economy  and  contributes  towards  technology transfer, development of strategic sectors, greater innovation, competition and employment creation amongst other benefits.

Gross FDI inflows have increased from over USD 34 billion in 2012-13 to over USD 80 billion in 2024-25. Total FDI inflow reported during the first half of FY 2025-26  (USD  50.36  billion)  has increased  by  16% compared  to  year  ago period (USD 43.37 billion). It is the highest ever for 1 st  half of a Financial Year.

The recent trend in net FDI inflows is associated with increased repatriation/disinvestment and rising Overseas Direct Investment (ODI) outflows. The ODI outflow on account of liberalized ODI rules notified in 2022 is helping Indian entities to enhance their business footprints abroad enabling them to compete in the global market, adding to the strength of Indian economy in long run. The increasing trend of repatriation indicates that India is not only attracting foreign capital but also delivering strong returns, which enhances its reputation as a reliable investment destination.

To  attract  more  FDI,  Government  has  put  in  place  an  investor  friendly  FDI policy, wherein most sectors, except certain strategically important sectors, are open for 100% FDI under the automatic route. More than 90% of the FDI inflow is  received  under  the  automatic  route.  Between  2014  and  2019,  significant reforms included increased FDI caps in the Defence, Insurance, and Pension sectors,  and  liberalised  policies  for  Construction,  Civil  Aviation,  and  Single Brand Retail Trading. From 2019 to 2024, notable measures included allowing 100% FDI under the automatic route in coal mining, contract manufacturing, and insurance intermediaries.

Government has leveraged the Free Trade Agreements for promotion of Export Diversification  and  attract  investment.  India  has  signed  15  Free  Trade Agreements  (FTAs)  and  6  Preferential  Trade  Agreements  (PTAs)  with  its trading partners. Trade and Economic Partnership Agreement between India and  the European  Free  Trade  Association  (EFTA) signed on 10th March 2024, is a modern and forward-looking agreement. For the first time in history of Free Trade  Agreements,  unilateral binding commitment of $100 billion investment and 1 million direct jobs over the next 15  years  has  been  secured  from  Switzerland,  Norway,  Liechtenstein  and Iceland.

Government is working with all stakeholders to enable our exporters to better utilize the benefits of India's FTAs with major market such as Japan, Korea, UAE and effectively utilize the opportunities that have been created with the recent  concluded  FTAs  such  as  with  the  EFTA  countries  and  the  UK.  The Government is in negotiations for early conclusion of mutually beneficial FTAs with the EU, Peru, Chile, New Zealand, Oman etc. The Government is engaged with all stakeholders-including exporters, Export Promotion Councils (EPCs), industry associations, and state governments to assess the evolving impact of the U.S. tariff measures.

The Government always strives to attract FDI by removing regulatory barriers, streamlining processes,  developing  infrastructure,  bettering logistics  and improving the business environment by enhancing the Ease of Doing Business (EoDB). To further strengthen a seamless business regulatory framework and healthy competition among  States/UTs,  Government of India released Business  Reforms  Action  Plan  (BRAP)  2024  rankings  and  Logistics  Ease Across  Different  States  (LEADS)  2024  report  to  inter-alia  communicate  to potential investors examples of positive business ecosystem as well as logistics performance undertaken by various States and UTs. The Regulatory Compliance Burden (RCB) initiative has resulted in over 42,000 compliance reductions, under 670 acts nationwide. Through the Jan Vishwas (Amendment of Provisions) Act, 2023, the Government has decriminalized 183 provisions across 42 Central Acts from 19 Ministries/Departments. The  Government  also provides an enabling environment for industrial development through policy interventions and initiatives such as Make in India, Start-up  India,  PM  GatiShakti,  National  Industrial  Corridor  Programme,  PLI schemes,  Indian  Footwear  and  Leather  Development  Programme,  National Single  Window  System  (NSWS),  India  Industrial  Land  Bank  and  Project Monitoring  Group  (PMG).  Project  Development  Cells  (PDCs)  have  been established  across  Ministries/Departments  to  fast-track  investments.   the Cabinet Committee on Economic Affairs approved 12 new projects under the National  Industrial  Corridor  Development  Programme  last  year  with  an investment of ₹28,602 crore across 10 states along 6 major corridors. To simplify tax compliance for Startups and foreign investors, the Income Tax Act, 1961 has been amended in 2024 to abolish angel tax and to reduce income tax  rate  chargeable  on  income  of  a  foreign  company. The  GST  reforms introduced in September 2025 represent a landmark step in reshaping India's taxation  system  to  better  serve  the  aspirations  of  its  youth.  These  reforms streamline  tax  structures,  reduce  rates,  and  correct  existing  anomalies  to promote entrepreneurship, job creation, and affordable living. Priority has been given to sectors with high youth participation, including education, automobiles, technology, handicrafts, footwear, healthcare, food processing, and textiles, to strengthen innovation and competitiveness. Further, a simplified GST structure with reduced rates across key sectors such as leather, footwear, paper, textiles, handicrafts, toys, packaging, and logistics is  expected  to  support  existing  businesses,  encourage  startups,  and  ease compliance for traders. By lowering GST slabs to 5% on several goods and rationalising rates in transport and allied sectors, the reforms aim to reduce enhance

costs for consumers, ease compliance for traders and competitiveness for Indian businesses.

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