​Fragile attractiveness, Pg8

Key Highlights:

• India's net Foreign Direct Investment (FDI) was negative for the third consecutive month in October 2025.
• Net FDI in April-July 2025 totaled $10.7 billion, more than triple the same period the previous year.
• Following tariff announcements by the U.S. in July 2025, investors withdrew $622 million in August, $1.7 billion in September, and $1.5 billion in October.
• India’s cumulative net FDI by the end of October 2025 fell to $6.2 billion.

Detailed Insights:

• The U.S. tariff announcements, starting with a 25% tariff and increasing to 50%, triggered a reversal in FDI trends.
• Gross FDI inflows in August and October 2025 were lower year-on-year, contrasting with a 33% growth rate in April-July 2025.
• Increased outflows are partly due to Indian companies investing abroad, indicating growing international competitiveness but also raising questions about domestic investment incentives.
• Despite corporate tax cuts, Production Linked Incentives (PLI), and tax reductions, India's investment attractiveness remains fragile and susceptible to external factors like trade policies.
• The Reserve Bank of India (RBI) acknowledged that uncertainty surrounding the U.S. trade deal led foreign portfolio investors to exit Indian equities.

Key Concepts Involved:

• Foreign Direct Investment (FDI): Investment made by a firm or individual in one country into business interests located in another country.
• Production Linked Incentives (PLI): A scheme that aims to give companies incentives for enhancing their domestic production.
• Tariff: A tax or duty imposed on goods when they are moved across a political boundary.