MUMBAI: As global economic volatility intensifies, India will require a multi-faceted approach to maintain robust foreign direct investment (FDI) inflows, according to the Economic Survey for fiscal year 2025-26. The document, presented in Parliament on Thursday, stresses the importance of tackling both structural and cyclical elements that impact capital movements into the country.
Sustaining Investment in a Turbulent Global Environment
The survey explicitly states that the primary challenge moving forward is to preserve FDI inflows despite heightened international instability. This situation necessitates a strategy with multiple dimensions that enhances the investment climate by addressing fundamental and temporary factors influencing capital flows.
India's Untapped Potential Despite Strong Fundamentals
While international assessments indicate that political stability and solid macroeconomic foundations are crucial drivers for attracting foreign investment, the survey notes that India has not fully capitalized on these advantages. The country excels in these areas yet continues to see FDI levels below their potential capacity.
Despite clear governmental intentions and demonstrated economic management, FDI inflows remain insufficient, particularly for meeting infrastructure requirements, the report observes. It emphasizes that forward-looking reforms are vital to draw increased foreign capital into the economy.
Recent FDI Performance and Sectoral Distribution
During the period from April to November 2025, gross FDI inflows showed significant improvement, reaching $64.7 billion compared to $55.8 billion in the corresponding period the previous year. For the entire fiscal year 2025, gross FDI inflows into India totaled $81.0 billion, marking a 13% increase from $71.3 billion in the prior year.
Of these total inflows, equity investments constituted $51 billion. Approximately 60% of these funds were channeled into key sectors including services, computer software and hardware, trading, non-conventional energy, construction, and the automobile industry.
Proposed Strategic Measures to Enhance FDI Attraction
The Economic Survey advocates for a more focused methodology to attract international capital. This involves pinpointing specific anchor companies within global value chains and establishing close collaborative relationships with them.
Creating a Collaborative State Apparatus
The proposed strategy would require developing a governmental framework that works directly with such firms as partners to resolve inter-agency challenges and deliver tailored, time-sensitive solutions. Direct engagement will help resolve cross-agency issues and provide customised and time-bound solutions, the survey asserts.
Reliable Implementation of Incentives
Merely offering attractive incentives is insufficient unless their execution is dependable, the document highlights. It is crucial for India not only to offer compelling incentives but also to ensure these incentives are reliably implemented, the survey states. This reliability would help reduce execution risks for foreign enterprises and foster a more predictable investment atmosphere.
Establishing a Centralized Accountability Mechanism
To position India as a credible alternative production hub, the survey recommends forming a single, empowered center of accountability. Such a structure would enable the nation to manage substantial volumes, integrate with international suppliers, adhere to regulatory and compliance norms, and ensure predictability across multi-year horizons.
Proactive Engagement and Diplomatic Efforts
Further recommendations include assembling a task force to interact with leading global corporations and promote India's competitive strengths, such as stability, macroeconomic resilience, sustained growth, and expansive market size. The survey also suggests that proactive diplomatic initiatives could help counterbalance tariff-related obstacles in global commerce.
Continued Focus on Simplification and Process Improvement
Simultaneously, the Economic Survey underscores the ongoing necessity to streamline processes and procedures to attract foreign direct investment. Simplifying bureaucratic hurdles remains a critical component of enhancing India's appeal to international investors seeking efficient and transparent operational environments.
