Foreign Direct Investment, Globalisation and Indian Commerce: Trends, Composition and Growth Linkages, 2000–2025

Abstract

This study examines the trends, composition and growth linkages of foreign direct investment (FDI) in India over the quarter century from 2000-01 to 2024-25, and places them in the context of economic globalisation and digitalisation. It combines an integrative review of 19 scholarly and institutional sources, drawing on the theory of the multinational enterprise, the empirical literature on FDI and growth, and India-focused studies of liberalisation, FDI policy and sectoral change, with a descriptive analysis of official data published by the Department for Promotion of Industry and Internal Trade. The data show that annual FDI equity inflows rose from US$2.5 billion in 2000-01 to a peak of US$59.6 billion in 2020-21 before settling at US$44 to 46 billion; that total FDI inflows, including reinvested earnings and other capital, reached a record US$81.04 billion in 2024-25, more than double the 2013-14 level; that cumulative inflows over the eleven years to 2024-25 were 143% higher than in the preceding eleven years and account for about 70% of the US$1.07 trillion received since 2000; and that inflows remain concentrated by sector (services, software and trading together 43%), by source (Singapore, Mauritius and the United States together 58%) and by destination (Maharashtra, Karnataka and Delhi together 64%). Four themes are developed: the liberalisation of the FDI regime, the scale and step-wise trend of inflows, the concentration of their composition, and the conditions under which FDI translates into growth. The findings are organised into a Regime–Inflow–Absorption framework and five research propositions. The paper argues that India's FDI performance is a policy achievement whose developmental return depends on broadening sectoral and regional absorption, and that digitalisation is changing both what is invested in and how.