The next phase of India's foreign direct investment (FDI) policy should focus not only on attracting investment but also on creating an environment in which investment can be sustained, expanded and more deeply integrated with India's economic and industrial ecosystem, an Assocham study said on Monday.
India's foreign direct investment landscape has changed significantly over the past 25 years, reflecting a sustained trajectory of growth and policy liberalisation across multiple sectors of the economy.
According to official DPIIT/RBI data, total FDI inflows rose from $4 billion in FY2000-01 to around $95 billion in FY2025-26, while FDI equity inflows rose from $2 billion to $59 billion over the same period, representing a substantial multi-decade expansion in India's ability to attract international capital.
Cumulative Investment Over 25 Years
Between FY2000-01 and FY2025-26, India received a cumulative total of $1.16 trillion in FDI and $791 billion in FDI equity, figures that underscore the scale of foreign capital that has flowed into the Indian economy over this extended period.
A Reflection of Global Integration
The trend reflects India's growing integration with the global economy and the gradual expansion and liberalisation of its FDI regime, said the study, framing this growth as the outcome of deliberate, sustained policy reform rather than incidental market forces alone.
A Call to Build on the Existing Foundation
"India has built a strong foundation for attracting Foreign Direct Investment. The next phase should focus on making it easier for investors to establish, operate and expand businesses in India, while strengthening the wider economic benefits of such investments," said Nirmal Minda, President, Assocham, framing the challenge ahead as one of deepening and operationalising India's investment appeal rather than simply continuing to attract fresh capital.
FDI's Role Across Key Sectors
The Assocham working paper highlights that FDI has become an important component of India's development across services, manufacturing and emerging sectors, reflecting its broad reach across the Indian economy rather than concentration in any single industry.
Where the Investment Has Gone
Services and computer software and hardware account for nearly one-third of cumulative FDI equity inflows, while significant investment has also gone into automobiles, pharmaceuticals, chemicals, infrastructure, electronics and renewable energy, said Minda, illustrating the diverse range of sectors that have benefited from India's FDI growth over the years.
What FDI Brings Beyond Capital
The paper emphasises that FDI supports development by bringing capital, technology, global market access and international business linkages, underscoring that the value of foreign investment extends well beyond the immediate financial inflows themselves.
Measuring FDI's Deeper Economic Impact
"Its wider impact depends on how much investment creates domestic value addition, employment, exports, technology and linkages with Indian enterprises," said Dr SP Sharma, Chief Economist, Assocham, pointing to a set of criteria that go beyond headline investment figures to assess how effectively FDI is actually contributing to broader economic development.
Key Recommendations for the Next Phase
The paper has recommended strengthening investor aftercare, improving the single-window approval process, reducing land costs and improving land availability, logistics, utilities, compliance and finance, promoting technology and R&D-oriented investment, developing ready-to-invest infrastructure, and improving coordination between Central and State governments. Taken together, these recommendations point toward a shift in policy focus from primarily attracting new investment toward removing the operational and administrative friction that can otherwise limit how effectively that investment translates into sustained economic activity, job creation and deeper integration with India's domestic industrial base.
