India’s foreign direct investment (FDI) landscape in the financial year 2024–25 (FY25) saw a remarkable concentration of inflows into two major states — Maharashtra and Karnataka — which together accounted for 51 percent of the total FDI received by the country, according to the Department for Promotion of Industry and Internal Trade (DPIIT).

The latest data released by the DPIIT provides a comprehensive view of how FDI distribution by state reflects regional investment climates and infrastructure development, with Maharashtra and Karnataka clearly emerging as preferred destinations for foreign investors.

Maharashtra Tops the FDI Chart in FY25

Maharashtra, India’s commercial capital, continued to dominate the FDI space by attracting $19.6 billion, which accounts for 31 percent of the country's total FDI inflows in FY25. This is a significant affirmation of the state’s status as an economic powerhouse and a hub for multiple industries, including:

• Financial services

• Information Technology (IT)

• Pharmaceuticals

• Real estate

• Manufacturing

Mumbai, Pune, and Nagpur have especially drawn attention for their investor-friendly policies, industrial corridors, and ease of doing business. Major tech parks, industrial zones, and infrastructure projects such as Samruddhi Mahamarg, Navi Mumbai Airport, and Metro expansion have played pivotal roles in enhancing the investment climate.

Karnataka Secures Second Position with $6.62 Billion

Karnataka, with its strong foundation in technology and innovation, received $6.62 billion in foreign direct investment in FY25. The state contributed a significant portion of India’s FDI pie, thanks to Bengaluru’s prominence as the Silicon Valley of India.

Investments poured into sectors like:

• Software development

• Startups

• Aerospace

• Biotechnology

• Renewable energy

Karnataka has built a reputation for a highly skilled workforce, world-class tech ecosystem, and proactive government schemes promoting innovation and entrepreneurship. Infrastructure developments such as the Suburban Rail Project, Peripheral Ring Road, and multiple industrial parks have made the state even more attractive to foreign investors.

Delhi, Gujarat, Tamil Nadu Follow the Leaders

While Maharashtra and Karnataka together led the tally, other states also secured impressive figures:

• Delhi: $6 billion

• Gujarat: $5.71 billion

• Tamil Nadu: $3.68 billion

• Haryana: $3.14 billion

• Telangana: $3 billion

These states have consistently improved their infrastructure and governance frameworks, making them competitive destinations for global businesses.

Delhi’s status as the national capital and a gateway to northern India remains a strong pull factor. Gujarat, on the other hand, has benefited from its robust industrial base, ports, and investor-centric policies like Vibrant Gujarat.

Infrastructure as the Driving Force Behind FDI Surge

According to economists and industry experts, the primary reason for the high FDI inflow into Maharashtra and Karnataka is the substantial improvement in infrastructure.

An economist quoted in the media said, Infrastructure has improved considerably, and that is making these states attractive destinations for FDI in India. From highways and expressways to IT parks and logistics hubs, the push for infrastructure excellence has helped these states gain investor confidence.

Central and state government initiatives such as:

• Gati Shakti National Master Plan

• National Infrastructure Pipeline (NIP)

• State-level ease-of-doing-business rankings

...have played key roles in aligning infrastructure growth with FDI objectives.

India’s Total FDI Sees 14 Percent Growth

India’s total FDI in FY25 stood at $81.04 billion, which represents a 14 percent increase compared to the previous year’s $71.3 billion. This is the highest foreign direct investment received in the last three financial years, indicating renewed global interest in India as an investment destination.

The total FDI includes:

• Equity inflows

• Reinvested earnings

• Other capital components

This increase in inflows signifies growing investor trust in India’s economic fundamentals, policy stability, and long-term growth trajectory.

FDI Trends Over the Years

To put the current numbers into perspective, let’s look at India’s FDI inflows over the past few years:

• FY22: $83.6 billion (record high due to post-pandemic rebound)

• FY23: $71.3 billion (global economic slowdown affected inflows)

• FY24: ~$71.3 billion (stagnant due to geopolitical uncertainties)

• FY25: $81.04 billion (bounce-back with improved domestic policy climate)

The rebound in FY25 is considered significant because it comes amid a global environment marked by inflationary pressures, conflict-driven uncertainties, and tight monetary policies in developed markets.

State-wise Share Reflects Competitive Federalism

The DPIIT’s data on state-wise FDI inflows also highlights the increasing role of competitive federalism. States that invest in infrastructure, digital governance, and industrial development are reaping the benefits in terms of global capital inflows.

This trend incentivises other states to follow suit, creating a virtuous cycle of reform and investment.

What This Means for India’s Economy

High and sustained FDI inflows bring several benefits:

• Job creation across sectors like manufacturing, tech, and services

• Technology transfer from multinational companies

• Improved export capabilities

• Development of allied industries

• Strengthening of India’s forex reserves

Maharashtra and Karnataka’s success stories show that state-level governance and infrastructure are as important as central policies when it comes to attracting FDI.

Conclusion: Infrastructure is the New Magnet for Global Capital

As India continues to position itself as a leading global investment hub, the example set by Maharashtra and Karnataka underscores the importance of world-class infrastructure, efficient governance, and proactive industrial policies.

With FDI inflows hitting a three-year high and key states competing for foreign capital, India’s economic decentralisation model seems to be working well. The lessons from FY25 suggest that regional development and urban innovation are key pillars of India’s journey towards becoming a $5 trillion economy.

Disclaimer

This article is for educational and informational purposes only and does not constitute financial advice. Investment decisions should be based on individual risk tolerance and consultation with SEBI-registered advisors. Market conditions are volatile and subject to change. Neither the author nor the platform is responsible for losses arising from use of this information.

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