India's FDI remains concentrated in a few source countries and sectors. Discuss the implications for economic resilience and manufacturing-led growth.

In August 2026, the US, Singapore and Mauritius supplied about 72% of India's $11.1 bn gross FDI inflows. Communication, services and manufacturing took more than two-thirds [1]. This concentration brings scale, but it also brings risks for resilience and for manufacturing.

Implications for economic resilience

• Stable non-debt finance: FEMA 20(R) defines FDI in a listed company as a stake of 10% or more [2]. Such capital is stickier than FPI, and steady inflows from large partners help fund the CAD. Net FDI was positive for a third straight month at $3.3 bn [1].
• Exposure to shocks at the source: Relying on three jurisdictions means a recession, policy shift or tax dispute in any one of them can sharply cut inflows.
• Opaque ownership: Singapore and Mauritius mostly act as conduits. The 2016 India–Mauritius DTAA Protocol targeted treaty abuse and round-tripping [4], but their continued high share leaves the ultimate beneficial owners unclear.
• Gap between gross and net: August outflows of $7.7 bn came mainly from repatriation by foreign firms [1]. Concentrated, mature investors can exit together, which puts pressure on the rupee.
• Security trade-off: Press Note 3 (2020) sent investment from land-border countries through the government route [5]. This protects strategic assets but narrows the options for diversifying sources.

Implications for manufacturing-led growth

• Positive: Manufacturing is among the top three sectors [1]. Up to 100% automatic-route FDI is allowed in sectors outside Schedule I of the NDI Rules [3]. With PLI schemes, this draws supply-chain investment, including from the US.
• Services skew: Communication and services dominate. They absorb less of the low-skill workforce that Make in India is meant to employ.
• Shallow linkages: Money routed through financial hubs may come as holding-company capital rather than greenfield plants that bring technology transfer.
• Retention unknown: There is no sector-wise outflow data, so nobody can tell whether manufacturing FDI stays in India or just passes through [1].

Concentration is both a strength and a weakness: it shows investors trust India, but it ties resilience and industrialisation to a few partners and sectors. India should diversify sources through trade agreements and enforce anti-abuse treaty provisions. The RBI should publish repatriation data by type and sector, and PLI incentives should be tied to greenfield capacity. Together these would make FDI a durable engine for Atmanirbhar Bharat and SDG 9 (industry, innovation and infrastructure).