Overview: Foreign Direct Investment (FDI) in India continues to show resilience despite global economic uncertainty, although the nature of investment is changing. Gross FDI rose 8% to $30 billion in the first quarter of FY2026-27, according to RBI data cited by Mint. Separately, UN Trade and Development (UNCTAD) reported that India’s annual FDI inflows increased 44% to $39 billion in 2025. However, announced greenfield investment declined from more than $111 billion in 2024 to about $74 billion in 2025, pointing to a more cautious investment cycle.
India continues to attract foreign capital, but the latest data presents a more nuanced picture. FDI inflows have increased, while the pipeline of newly announced greenfield projects has weakened. For businesses planning an India entry in 2026, this makes it important to understand not only which sectors are attracting foreign investment, but also the applicable FDI route, sectoral cap and FEMA compliance requirements.
For foreign businesses considering an Indian subsidiary, joint venture or other permitted structure, the investment decision is closely linked with regulatory requirements. The applicable route can determine whether prior Government approval is required, while post-investment obligations include reporting, valuation and ongoing FEMA compliance.
FDI in India 2026: Growth and Investment Trends
India remained a major recipient of foreign investment in 2025. According to UNCTAD’s World Investment Report 2026, FDI inflows into India increased by 44% to $39 billion, contributing significantly to the rise in FDI across South Asia.
However, the headline inflow figure does not tell the complete story.
UNCTAD reported that the value of announced greenfield investment in India fell from more than $111 billion in 2024 to about $74 billion in 2025. The number of announced projects also declined marginally. The slowdown was particularly visible in manufacturing, where announced investment fell from around $65 billion in 2024 to $27 billion in 2025.
The contrast is important. Existing and other forms of foreign investment continued to support India’s overall FDI figures, while the value of new greenfield commitments moderated. The project indicators point towards a more cautious investment cycle.
More recent data also indicates that gross FDI remained resilient. Mint, citing RBI data, reported that gross FDI rose 8% to $30 billion during the first quarter of FY 2026-27.
Which Sectors Are Attracting FDI in India?
India’s foreign investment landscape continues to be closely linked with technology, manufacturing and digital infrastructure.
Important areas include:
- Electronics and semiconductors: India continues to promote investment in electronics, semiconductor manufacturing and related supply chains.
- Digital infrastructure: Data centres and other digital infrastructure are becoming increasingly important areas of international investment.
- Information and communication technology: ICT remains an important part of India’s greenfield investment landscape.
- Renewable energy: Renewable energy continues to attract investment, although the global renewable-energy investment environment softened in 2025.
- Manufacturing: Electronics-related manufacturing remained one of India’s significant manufacturing segments despite the overall decline in announced manufacturing investment.
At the global level, UNCTAD reported that data centres accounted for more than one-fifth of announced greenfield investment value in 2025, with announced investment exceeding $270 billion. The organisation linked this growth largely to demand for AI infrastructure and digital networks.
FDI Routes and Compliance for Foreign Investors in India
Choosing the right investment structure is only one part of entering the Indian market. Foreign investors must first establish whether the proposed activity is permitted under India’s FDI framework and identify the applicable entry route.
The key considerations include:
- Automatic Route or Government Route: Foreign investment in activities under the Automatic Route generally does not require prior Government approval. Investment under the Government Route requires prior approval from the competent authority.
- Sectoral caps and conditions: The permitted level of foreign investment depends on the relevant sector, entry route and applicable conditions under India’s FDI framework.
- Investment structure: Depending on the business activity and investment objectives, a foreign investor may consider an Indian subsidiary, joint venture or, where permitted, an LLP. The appropriate structure should be assessed against the applicable FDI conditions.
- FEMA reporting: An Indian company issuing equity instruments to a non-resident investor, where the issue qualifies as FDI, is required to report the issue through Form FC-GPR within 30 days from the date of issue.
- Annual FLA Return: An Indian company that has received FDI, or an LLP that has received investment through capital contribution, is required to file the Foreign Liabilities and Assets (FLA) Return with the RBI by 15 July each year, subject to the applicable reporting requirements.
- Valuation and pricing: Foreign investment transactions must comply with the applicable pricing and valuation requirements under FEMA.
- Tax and corporate compliance: Foreign investors must also consider Indian tax laws, Companies Act requirements, sector-specific regulations and other applicable statutory obligations.
FDI Entry Routes in India
| Entry Route | Approval Requirement | Key Compliance Point |
|---|---|---|
| Automatic Route | No prior Government approval generally required | Investment must comply with the applicable sectoral cap, conditions and FEMA reporting requirements |
| Government Route | Prior approval from the competent Government authority required | Proposal is filed online through the National Single Window System (NSWS) and processed by the concerned authority |
Applications for FDI proposals requiring Government approval are filed through the National Single Window System (NSWS). DPIIT identifies the concerned administrative ministry or department and monitors the processing of proposals.
FDI and India’s Broader Investment Cycle
Foreign investment forms only one part of India’s wider investment cycle.
According to a 2024-25 investment data, the household sector, including unincorporated enterprises, accounted for around 44% of total investment, while India’s private non-financial sector accounted for about 30%. Investment by the private non-financial sector grew 7% in 2024-25, compared with 3% in the previous year.
These figures underline the role of domestic investment alongside foreign capital. For the Indian economy, the wider question is how investment translates into productive capacity, infrastructure, technology and employment.
For foreign investors, the changing mix also reinforces the importance of assessing not just the size of the FDI opportunity, but the regulatory framework, investment structure and long-term operating requirements before entering the Indian market.
FAQs
Is FDI in India increasing?
Which sectors are attracting FDI in India?
Electronics, semiconductors, information and communication technology, digital infrastructure, renewable energy and selected manufacturing activities remain important areas for foreign investment. The specific FDI limit and route depend on the relevant sector and applicable conditions.
What is FC-GPR in FDI?
FC-GPR is the RBI reporting form used by an Indian company for reporting the issue of equity instruments to a person resident outside India where the issue is reckoned as FDI. The report is required to be filed within 30 days from the date of issue of the equity instruments.
Can a foreign investor invest in an Indian LLP?
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Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.
