Economic Survey calls for multi-pronged push to sustain FDI amid global volatility

MUMBAI: India will need a multi-pronged strategy to sustain foreign direct investment (FDI) inflows as global economic volatility intensifies, the Economic Survey for fiscal year 2025-26 (FY26) said, underscoring the need to address both structural and cyclical factors that influence capital flows.

“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,” said the Economic Survey, tabled in Parliament on Thursday.

While global surveys show that political stability and strong macroeconomic fundamentals are key drivers of FDI, the survey said India, despite excelling on these parameters, has not fully leveraged its strengths.

“Despite a clear government intent and proven economic management, FDI inflows remain below their potential, especially for infrastructure needs,” it said, adding that proactive reforms are essential to attract higher foreign investment.

In April-November 2025, gross FDI inflows strengthened further to $64.7 billion, compared with $55.8 billion a year ago. FDI outflows, on the other hand, rose to $22.1 billion during the period.

The survey called for a more targeted approach to attracting global capital, including identifying a specific set of global value chain anchor companies and working closely with them. This would involve creating a state apparatus that collaborates directly with such firms as partners to resolve cross-agency issues and offer customized, time-bound solutions.

According to the survey, “direct engagement will help resolve cross-agency issues and provide customised and time-bound solutions.”

It also stressed that incentives alone are not sufficient unless their implementation is reliable.

“It is crucial for India not only to offer compelling incentives but also to ensure these incentives are reliably implemented,” the survey said, adding that this would help mitigate execution risks for foreign firms and create a more stable investment environment.

In FY25, gross FDI inflows into India stood at $81.0 billion, a 13% rise from $71.3 billion a year ago. Of these gross FDI inflows, equity inflows accounted for $51 billion, and approximately 60% of these flows were directed towards services, computer software and hardware, trading, non-conventional energy, construction, and the automobile sector.

The survey called for setting up a single, empowered centre of accountability to position India as a credible alternative production hub. Such a framework would enable the country to handle large volumes, integrate with global suppliers, meet regulatory and compliance standards, and provide predictability over a multi-year timeframe.

To further boost inflows, the survey suggested creating a task force to engage with top global companies and promote India’s advantages, including stability, macroeconomic strength, sustained growth, and market size. Proactive diplomacy, it said, could also help offset tariff-related challenges in global trade.

At the same time, the survey emphasized the need to continue simplifying processes and procedures to attract FDI.