Overseas investors have realized significant returns from their investments in India, with repatriation reaching a record high of $97.7 billion in FY25. This represents an increase from $87.5 billion in FY24, highlighting the growing attractiveness of the Indian market to foreign investors. The surge in repatriation is attributed to increased Foreign Direct Investment (FDI) inflows and debt investments. Data from the Reserve Bank of India (RBI) indicates a rise in income from the deployment of foreign exchange reserves, further contributing to the overall increase.
Indian companies have also been actively investing overseas, which has helped to balance the investment income segment of the current account. The Indian government aims to attract $110 billion annually in FDI over the next seven years, as the country becomes a favored destination for investors seeking to diversify away from China.
Citigroup anticipates that India will attract $100 billion in foreign investments this fiscal year, drawn by opportunities in high-tech manufacturing, infrastructure, and climate-change projects. Companies involved in helping India achieve its net-zero emissions goals are expected to be major beneficiaries of these foreign capital flows. Apart from climate transition, India's advancements in electronics and infrastructure-related manufacturing are gaining prominence among investors.
JPMorgan projects that foreign investments in Indian equities could reach $100 billion, particularly from markets like China, Malaysia, and the Middle East. A strong inflow of $11 billion in the past seven months indicates robust investor confidence, despite high valuations. Foreign investors are attracted by India's growth potential, which offers better value compared to the negative or zero growth rates in their home markets.
India is also close to finalizing a trade deal with the European Free Trade Association (EFTA), which includes Switzerland, Norway, Iceland, and Liechtenstein, that could result in these nations investing as much as $100 billion over 15 years in exchange for easier trade access to India. This deal, if finalized, would mark the first time India has secured an investment commitment of this nature as part of a free trade agreement. The investment from EFTA countries would primarily come from private businesses and state-sponsored vehicles, targeting both existing and new manufacturing projects and is expected to create over 1 million jobs in India.
India has set ambitious targets of achieving $100 billion in annual FDI, according to statements by the Information Technology Minister, Ashwini Vaishnaw. This strategy involves substantial investments in physical and digital infrastructure, uplifting the socio-economic strata, fostering manufacturing growth, and streamlining business processes. Despite concerns about protectionist policies, India has attracted significant foreign investment, with companies like Apple, Samsung, Kia, and Airbus expanding their operations in the country.
While India presents itself as an attractive investment destination, challenges remain, including addressing unemployment, particularly among the youth. The government is focused on strengthening manufacturing and is collaborating with companies like Apple to enhance their manufacturing and retail presence in India.
