The Department for Promotion of Industry and Internal Trade (DPIIT) has identified key sectors with high potential such as electronics, chemicals, footwear and toys where it seeks to boost foreign direct investments (FDI) by actively seeking out companies and facilitating inflows, sources have said.
The DPIIT – the nodal Ministry for FDI in India – is also working with States to help them meet the needs of potential investors within the policy space determined by their regulations, the source added.
“To increase FDI flow, the government is focusing on identifying requirements sector-wise and determining what the critical sectors are so that the country can make its value chains. Invest India is working specifically on that and is also getting in touch with foreign companies,” a source tracking the matter closely said.
Sectoral analysis
After a sectoral analysis carried out by the government, which included interactions with various foreign companies, the potential sectors identified for strengthening FDI flows include the ESDM (electronics system design and manufacturing), chemicals, leather & footwear, non-leather footwear and toys, the source said.
“Many foreign companies in the identified sectors have indicated their interest in moving part of their supply chains to India from several countries including China,” the source added.
In FY25, FDI inflows were estimated at $81.04 billion, which was 14 per cent higher than $71.28 billion in the previous year, per government figures.
Over the last five years (April 2000-March 2025), India’s services sector attracted the highest FDI equity inflow of $118.84 billion, followed by computer software and hardware industry at $110.69 billion, trading at $47.57 billion, telecommunications at $40.07 billion and automobile at $37.85 billion.
“To actually get investors to bring their money into the sectors of their interest, it is also very important to work with States as they have their own policies and strategies. The investors would have their individual requirements such as wanting to be close to a port in case they import a lot of raw materials. If they want to cater to domestic market, they would have some other requirements. The DPIIT is in touch with States to facilitate that,” the source said.
While States such as Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh have succeeded considerably well in attracting FDI, others such as UP, Odisha, MP and Rajasthan are beginning to pick up, the source added.
Top FDI source
In the April 2000-March 2025 period, Mauritius was the top FDI source for India at $180.19 billion (25 per cent share), followed by Singapore at $174.88 billion (24 per cent share), the US at $70.65 billion (10 per cent share), the Netherlands at $53.30 billion (7 per cent share), and Japan at $44.39 billion (6 per cent share).
The DPIIT is also seeking to diversify the countries from which FDI is being sourced. “The push to diversify supply chains continues. Instead of depending on one country where we have a visible trend of about 20-30 per cent, it is good to diversify and that is our endeavour,” the source said.
