Foreign direct investment in India surged 44% to US$39 billion in 2025, driven largely by Alphabet Inc.’s data centre project, though a sharp decline in greenfield investments signalled a weaker investment outlook, according to the United Nations’ trade agency.
Alphabet and Hynfra lead big-ticket inflows
The increase was led by the US$14.5 billion Alphabet project and Polish developer Hynfra’s US$4 billion green hydrogen investment, both in Andhra Pradesh, a state governed by a key ally of Prime Minister Narendra Modi, UN Trade and Development said in its annual World Investment Report released Tuesday.
These two projects accounted for nearly half of the total FDI inflows, suggesting that foreign inflows were driven by a handful of large projects rather than broad-based corporate spending. Domestic private investment, critical for joint ventures with foreign partners, has remained subdued, while India has lagged other markets in attracting AI-related investment.
Greenfield investments drop sharply
The UN data showed that the value of announced greenfield projects fell about 33% in 2025 to roughly US$74 billion from more than US$111 billion a year earlier, while the number of projects edged lower. The weakness was most evident in manufacturing, where the value of announced investments more than halved to US$27 billion from about US$65 billion in 2024.
The decline was steepest in capital-intensive industries, although the number of projects fell only modestly, suggesting companies scaled back project sizes rather than cancelled investments. Electronics remained one of the largest manufacturing segments by both investment value and project count, despite retreating from its 2024 peak.
Services sector shows resilience
Services proved more resilient, with greenfield investment exceeding manufacturing as companies continued expanding their digital infrastructure. Financial services also saw renewed investment activity. Amazon.com Inc. last month committed an additional US$13 billion to expand its planned investments in India, including AI and cloud infrastructure, signalling growing interest in the country’s digital economy.
Policy context and challenges
The inflows are significant for India at a time when policymakers are seeking stable sources of foreign capital to help finance the country’s investment needs and narrow its current-account deficit. As the world’s third-largest oil importer, India remains vulnerable to swings in global energy prices that can pressure the rupee and widen its import bill. Unlike portfolio flows, which can reverse quickly during bouts of market volatility, foreign direct investment is generally viewed as a more durable source of capital that supports long-term growth, employment and exports.
India’s policy framework remains focused on advanced manufacturing, infrastructure and deeper integration into global value chains, UNCTAD said. “Tariff uncertainty, supply chain realignment and weaker global investment sentiment are affecting the scale of new manufacturing and infrastructure commitments.”
