Increased outward FDI by Indian companies ‘warrants attention': Finance Ministry
Even as Indian companies turn 'cautious' on investing within the country, and the global economic scenario remains uncertain, the increased outward foreign direct investment by Indian companies 'warrants attention', the Ministry of Finance has noted in a new report.
The Hindu had previously reported how the Reserve Bank of India's data showed that, in 2024-25, Indian companies invested a total of $29.2 billion in other countries, 75% higher than the previous year, which was a major contributor towards India's net foreign direct investment (FDI) figure falling 96% to just $0.4 billion.
'That Indian overseas direct investment increased nearly by $12.5 billion during the year FY25, even as uncertainty reigned in the world, warrants attention, especially given their cautious attitude towards domestic investment,' the Department of Economic Affairs of the Ministry of Finance noted in its Monthly Economic Review (MER) released on Tuesday (May 27, 2025).
Data from the private sector database Centre for Monitoring Economy (CMIE) shows that the Indian private sector is indeed turning more cautious about its plans, as exhibited by a rising ratio of projects cancelled versus new ones announced.
Analysis by The Hindu of the CMIE data shows that the ratio of dropped projects to new project announcements by the Indian private sector — where a higher ratio indicates higher caution — has risen steadily to 36% in 2024-25 from 30.8% in 2023-24, and 21.8% in 2022-23. This rising trend breaks a streak where this ratio had been falling since 2018-19.
This cautious approach is confirmed by the latest Forward-Looking Survey on Private Sector Capex Investment by the Ministry of Statistics and Programme Implementation (MoSPI), cited in the Finance Ministry's report, which shows that Indian corporates are planning fewer investments in this financial year as compared to last year.
According to this survey, Indian corporates expected to invest ₹6.6 lakh crore in 2024-25, up 57% from the ₹4.2 lakh crore of actual capital expenditure they incurred in 2023-24. However, in the current financial year 2025-26, this number is again expected to fall to ₹4.9 lakh crore, according to the survey.
'The slightly lower intended capital expenditure for FY26, though still above FY24 levels, reflects cautious planning after a strong FY25,' the MER noted. Overall, the MER said the trend indicates growing corporate confidence and a 'judicious approach to investment' in an evolving global scenario.
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