Economic survey flags FDI 'below potential' amid global trade volatility

Chief Economic Advisor V Anantha Nageswaran has pointed out that the Foreign Direct Investment have been on the weaker side, “below their potential” for the fiscal year 2025-26. This is particularly due to the structural and cyclical factor that influences the capital inflows. The low FDI was attributed to the profit-taking by investors who had invested in infrastructure projects in the previous decades. The other structural problem is the compulsion of Indian businesses to invest overseas.

“Going forward, the challenge is to sustain FDI inflows in an environment of heightened global volatility, which underscores the need for a multi-pronged strategy that strengthens the investment climate by addressing both structural and cyclical factors that determine capital flows," read the Economic Survey.

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However, according to the Economic Survey 2025-26 tabled by Union Minister of Finance and Corporate Affairs, Smt Nirmala Sitharaman, the Gross FDI inflow still remains the highest in South Asia, surpassing other peers such as Indonesia and Vietnam. The Gross FDI inflow stood at $81 billion in 2025, increasing 13 per cent from $71.3 billion a year ago. Approximately 60 per cent of those are directed towards services, IT, energy and the manufacturing sector. The net FDI inflow increased nearly sevenfold to $5.6 billion during April–November 2025, up from $0.8 billion a year earlier. However, some months have seen negative value, specifically in August, September, October, and November, as outward capital movement surpassed investment.

“Despite a clear government intent and proven economic management, FDI inflows remain below their potential, especially for infrastructure needs,” read the statement. The survey urged for a cross-agency engagement with specific companies in the value chain by creating a state apparatus that collaborates with such firms as partners to provide customisable solutions.