UNCTAD Investment Report Lauds India FDI Rebound, Masks Fragility

The UN Trade and Development (UNCTAD) World Investment Report 2026, released on July 7, presents a cautiously optimistic picture for India. After two years of a decline, global foreign direct investment (FDI) rebounded in 2025, despite economic uncertainties during the year. India displayed a robust hike in its inward flows at $39 billion, improving its rank from 13^th to 11^th.

Yet, India’s headline numbers mask volatility and deeper fragilities. First, although the FDI value is 44% higher than in 2024, it remains well below the peak of $49 billion received in 2022. In fact, even during 2020, when the world was faced with the coronavirus pandemic, India attracted far more investments at over $64 billion. This volatility underscores India’s sensitivity to global shocks and domestic policy uncertainty.

Two, India’s share in global FDI inflows recovered to 2.4% in 2025, after declining in the previous two years, but stayed short of the 3.4% share for 2022. The country stood at 8^th rank among host countries that year.

Three, announced greenfield investment surged in the last four years, reaching a peak of $111 billion in 2024, before dropping to $74 billion, primarily due to a decline in investments in capital-intensive manufacturing sectors. The electronics manufacturing sector topped the value and number of greenfield announcements, while the services sector maintained a steady pace over 2021-2025. 

On India’s industrial development strategy, the World Investment Report highlights policies such as the Production-Linked Incentive Scheme and the National Industrial Corridor Development Programme, among others, along with reforms including the National Single Window System and the India Industrial Land Bank.

The report notes that India’s policy framework targets advanced manufacturing, infrastructure development and deeper integration into global value chains. At the same time, it cites tariff uncertainty, supply chain realignment and dissipating investor confidence as adversely impacting new project commitments.

The report stresses the rising concentration of global FDI flows, both sectorally and geographically. Advanced and strategic sectors moved up from 16% of project values to as much as 44%. Data centre investment announcements surged, capturing an additional $235 billion to the detriment of sectors such as GVC-intensive industries and infrastructure. In India, Google’s ongoing investment of $14.5 billion and Poland’s Hynfra investment of $4 billion in green hydrogen-ammonia stood as among the top announcements globally, both in advanced sectors.

Geographically, while FDI to developed economies increased by 11%, developing countries saw only a 2% rise in inflows. This means that developing countries, including India, must compete harder for capital amid rising fragmentation and expanding investments in strategic sectors.

India currently ranks a low 22^nd in AT Kearney’s FDI Confidence Index, a survey of senior executives of global corporations. This is far from the top-5 rank it achieved until 2012.

Further, NITI Aayog’s Investment Friendliness Index report, released this month, stresses that the five states of Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu account for about 85% of FDI inflows. Unless more states improve their competitiveness through policies on land, labour, clearances and infrastructure, India’s FDI experience will remain inequitable.

India’s gross FDI of $95 billion (RBI data for 2025-26) is impressive in the current globally fraught environment. However, recent elevated repatriation and exits by overseas investors are detracting from the effort.

The World Investment Report concludes with suggestions for developing economies to better leverage their resources to attract overseas capital. Strategic prioritisation of sectors based on data to identify capabilities, infrastructure construction and skill development, and targeted industrial policies that synchronise investment, trade and innovation policies are some of the actions required by developing countries.

The report also suggests that countries should mobilise capital through investment funds, development banks and sovereign wealth funds, rather than offer expensive subsidies. Resilience to shocks can be built through stronger aftercare, investor retention services and instruments such as credit guarantees, export credit, working capital and trade finance. Effective implementation of free trade and investment agreements, regional production networks and regional investment platforms are some of the other suggestions put forth in the report.

All these are deeply relevant for India. The country must aim to attract smaller foreign corporates, encourage retention, and continue simplifying the investment climate to attract more overseas capital and build resilience to global risks.