Lok Sabha Question No. 298 (UNSTARRED), answered on 2025-12-02
Subject: Foreign Direct Investment
Ministry: COMMERCE AND INDUSTRY
Asked by: Shri Lalji Verma, Shri Brijendra Singh Ola

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

## LOK SABHA

## UNSTARRED QUESTION NO. 298. TO BE ANSWERED ON TUESDAY, THE 02 ND  DECEMBER, 2025.

## FOREIGN DIRECT INVESTMENT

## 298.   SHRI BRIJENDRA SINGH OLA: SHRI LALJI VERMA:

## Will the Minister of COMMERCE AND INDUSTRY वाणिज्य एवं उद्योग मंत्री

be pleased to state:

- (a) whether the Government has set a target to achieve $100 billion Foreign Direct Investment  (FDI)  annually,  if  so,  the  details  thereof  and  if  not,  the  reasons therefor;
- (b) whether the Government has achieved this target, if so, the details thereof and if not, the reasons therefor;
- (c) whether the Government proposes to reform FDI policies to achieve this and if so, the details thereof and if not, the reasons therefor;
- (d) whether the FDI inflows declined to a five-year low level in the Financial Year 2024-25  and  if  so,  the  reasons  therefor  and  the  steps  being  taken  by  the Government to improve the same;
- (e) the  progress  made  in  liberalizing  FDI  in  sensitive  sectors  such  as  defence, insurance, and telecommunications along with the impact of the same on FDI in 2024;
- (f) the  steps  taken  by  the  Government  to  attract  investment  in  the  services, software and manufacturing sectors; and
- (g) the timeline fixed by the Government to achieve the FDI target along with the mechanisms put in place to monitor its progress?

## 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), (b) & (g): The Government reviews the FDI policy on an ongoing basis and makes significant  changes  from  time  to  time,  to  ensure  that  India  remains  an attractive & investor-friendly destination. However, the Government does not fix  targets  for  FDI  inflows  as  FDI  is  largely  a  matter  of  private  business decisions. FDI inflows depend on a host of factors such as availability of natural resources, market size, infrastructure, political and general investment  climate,  as  well  as  macroeconomic  stability  and  investment decisions of foreign investors.

The Government of India always strives to attract larger 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 across the country and  nudge  states  to  promote  healthy  competition  to attract investment,  including  FDI,  various  initiatives  are  being  undertaken. The 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 decriminalised 183 provisions across 42 Central Acts from 19 Ministries/Departments.

The  Government  has  undertaken  transformative  reforms  across  multiple sectors to liberalise FDI norms. 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.

- (c) & (f): FDI  policy  provisions  have  been  progressively  liberalized  and  simplified across  various  sectors  such  as  Pension,  Other  Financial  Services,  Asset reconstruction  Companies,  Broadcasting,  Pharmaceuticals,  Single  Brand Retail Trading, Construction & Development, Power Exchanges, ecommerce  activities,  Coal  Mining,  Contract  Manufacturing,  Digital  Media, Civil Aviation etc. In the recent past, reforms in the FDI Policy have been undertaken  in  sectors  such  as  Defence,  Insurance,  Petroleum  &  Natural Gas, Telecom and Space.

The Government engaged Invest India, the National Investment Promotion and  Facilitation  Agency,  to  bring  together  governmental  oversight  and private-sector  agility,  ensuring  that  investment  promotion  becomes  more efficient, professional, and responsive to investor needs.

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

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.

Various  efforts  (as  placed  in Annexure) have  been  taken  to  attract investments and improve India's attractiveness as an investment destination in services, software, and the manufacturing sector.

Apart from the above, the extant FDI policy framework follows a negative list approach wherein barring a select few sectors, FDI is permitted up to 100% under the Automatic Route, subject to applicable laws/regulations, security and other conditionalities.  FDI  has  played  a  transformative  role  in  India's development by providing substantial non-debt financial resources, fostering technology transfers, and creating employment opportunities.

- (d): FDI inflow reported in the Financial Year 2024-25 (USD 80.62 billion) is the highest  amongst  the  last  three  financial  years.  Further,  total  FDI  inflow reported during the first half of FY 2025-26: USD 50.36 billion (Provisional) has increased by 16% compared to the first half of FY 2024-25: USD 43.37 billion. It is the highest ever for first half of a Financial Year.
- (e): FDI in the Defence sector is allowed up to 74% through the Automatic Route (from earlier 49%) for companies seeking new industrial licenses. Further, 100% FDI in the Telecom Sector is allowed under the Automatic Route. FDI sectoral  cap  in  the  insurance  sector  has  been  revised  from  49%  to  74% under the automatic route. This enhanced limit will be available for those companies, which invest the entire premium in India. Since their respective years of liberalization-FY 2020-21 for Defence Industries and FY 2021-22 for Insurance and Telecommunications-the Defence Industries, Insurance, and Telecommunications sectors have attracted FDI inflows of USD 11.59 million, USD 8,788.59 million, and USD 1,740.81 million, respectively, up to FY  2024-25.  These  sectors  have  also  displayed  strong  post-reform momentum,  registering  growth  of 196.83%  increase  in  FDI  in  Defence Industries, 199.20%  increase  in Insurance, and  11.68%  increase  in Telecommunications during FY 2024-25 compared with their corresponding year of liberalization.

## ANNEXURE REFERRED TO IN REPLY TO PARTS (c) & (f) OF THE LOK SABHA UNSTARRED QUESTION NO. 298 FOR ANSWER ON 02.12.2025.

Details of initiatives taken to attract investments and improve India's attractiveness  as  an  investment  destination,  particularly  in  the  Software, Service, and Manufacturing Sector.

The details of initiatives taken to attract investments and improve India's attractiveness as an investment destination, particularly in the Software, Service, and Manufacturing Sector, are placed below:

## 1.  Software Sector:

To attract FDI in the software sector, Special Economic Zones (SEZs) and  Software Technology Parks of India (STPIs) have been set up to promote the growth of the software sector by providing tax benefits, infrastructure support, and regulatory ease. SEZs  offer  tax  incentives,  simplified  regulations,  and  world-class  infrastructure  to attract  foreign  and  domestic  investments  in  IT and  software  development.  Further, STPIs help to promote software development and exports in addition to Governmentbacked incentives like Make in India and Digital India.

## 2.  Service Sector:

To address barriers in service sectors, concerted efforts have been put to promote the Startup  and  Innovation  Ecosystem  in  India.  For  instance,  to  stimulate  innovation and attract investments in startups, the government has abolished the 'angel  tax'  for all classes of investors, effective from 2025 -26. This move eliminates a significant  hurdle  for  early-stage  companies  and  their  investors. Further,  in  the Union Budget 2025, it was announced that a new Fund of Funds with ₹10,000 crore will be established to expand support for startups.

## 3.  Manufacturing Sector:

The Government has undertaken several initiatives to accelerate growth and establish India as a global manufacturing powerhouse. In order to attract investments, 100% FDI is allowed the automatic route in the Manufacturing sector. Launched in 2020, the PLI Scheme is a strategic leap toward self-reliance. Keeping in view India's vision of becoming  'Atmanirbhar',  Production  Linked  Incentive  (PLI)  Schemes for 14 key sectors  were  announced  with  an  outlay  of  Rs.  1.97  lakh crore (over US$26 billion) to enhance India's Manufacturing capabilities and exports. Further, the Make in India initiative stands as a testament to India's determination  to  reshape  its  manufacturing landscape and enhance its global standing. In addition to ongoing schemes of various Ministries and Departments, the Government has taken various steps to boost share of manufacturing in Gross Value Added (GVA). These measures include Public Procurement (Preference to Make in India) Orders, Phased Manufacturing Programme (PMP) and QCOs (Quality Control Orders) etc.  The initiatives taken  by the  Government  have  contributed  to  a  69%  increase  in  FDI  equity  inflow  in  the manufacturing sector, rising from USD 98 billion in 2004-2014 to USD 165 billion in 2014-2024.

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