DPIIT data shows India attracted $57.2 billion in FDI equity in 2025. More than half was reported in just two locations: ‘New Mumbai’ and ‘Bangalore Urban,’ accounting for 27.54% and 22.96%, respectively.
The economic case for FDI is not that foreign money crosses the border, but the new capital it adds to the recipient economy. From this arises the productivity dividend, which comes when investment adds technology, managerial capability, supplier linkages, exports, R&D and productive assets. The same competitiveness that attracts such capital can then be strengthened by it. However, the latest district-level data on FDI inflows released by DPIIT shows large regional divergences in India in where FDI comes from, both across states and within states.
This suggests India is in a cumulative process in which its most productive ecosystems attract the investment best positioned to raise future productivity, while regions that begin with weaker infrastructure, human capital, and industrial depth struggle to enter the cycle. The path dependence is apparent: foreign investors are disproportionately attracted to places where foreign investors already operate. DPIIT data shows India attracted $57.2 billion in FDI equity in 2025. More than half was reported in just two locations: “New Mumbai” and “Bangalore Urban,” accounting for 27.54% and 22.96%, respectively. The next three locations were Delhi with 9.03%, Ahmedabad at 7.91%, and Gurugram with 6.84% of the share in FDI equity.
Together, the top five accounted for nearly three-fourths of India’s total FDI equity in 2025. In fact, 90% of India’s FDI was concentrated in just 12 districts. The district data also reveal a second level of concentration inside the states. Bangalore Urban accounted for roughly 99% of Karnataka’s 2025 inflow; Gurugram, 94% of Haryana’s; Ahmedabad, 88% of Gujarat’s; Hyderabad and Rangareddy, 98% of Telangana’s; Chennai, Kancheepuram and Thiruvallur, 94% of Tamil Nadu’s; and “New Mumbai”, 86% of Maharashtra’s.
This geographical concentration persists when the data are examined sector by sector. Between October 2019 and December 2025, the five leading states accounted for 99.6% of FDI in telecommunications, 96.5% in automobiles, 93.6% in computer software and hardware, over 90% in trading, construction, services and pharmaceuticals, 89.6% in non-conventional energy and 85.3% in chemicals.
FDI concentration is not confined to the national aggregate; it is reproduced within individual sectors. A large part of India’s reported FDI geography is also a geography of corporate transactions, not of where multinationals built factories. In 2025, 73.3% of equity inflows came through the automatic route, 23.2% through the acquisition of existing shares and about 3.6% through the government route. Between 2000 and 2025, such acquisitions made up about one-fifth of equity FDI.
New ownership may bring better management, technology, export markets or follow-on investment, but equity inflows cannot be read as a one-for-one measure of new productive capacity. The real question is what that capital subsequently added to productive capacity. The state-level data underline that, in some cases, what appears as a broad sectoral trend is heavily influenced by a handful of very large transactions. Since October 2019, the 25 largest FDI transactions made up about 57% of Gujarat’s total inflows, 34% in Tamil Nadu, 24% in Karnataka, 21% in Delhi and 19% in Maharashtra. Two states with similar FDI totals may thus have arrived there in very different ways.
In one state, investment may be spread across many companies and projects; in another, a few large transactions may account for a substantial share of the total. So, the headline FDI number tells us how much money was recorded, but not how broad-based that investment was across firms, sectors or projects. The usual question “which state receives the most FDI?” is therefore less informative than it appears. State and district data capture where foreign equity is recorded, not where productive assets, jobs, technology transfer and productivity gains materialise.
High FDI may reflect a strong local ecosystem, but also the location and corporate structures of large recipient companies. Meanwhile, state governments have become active competitors for foreign capital. This began after liberalisation with overseas delegations, diaspora networks and investor summits, and is now institutionalised. The Union controls economic diplomacy, trade agreements and investment rules, but many of the factors that determine where investment lands are shaped by states: land, infrastructure, power, clearances, skills, incentives and administrative machinery. The result is competitive subnational economic diplomacy.
States now court countries and industries through investor desks, facilitation agencies and customised packages, and push to convert announcements into operating projects. The competition is also spreading beyond established centres: Madhya Pradesh, Odisha, Bihar and Punjab have recently courted Gulf investors. Yet this activism has not erased regional divergence. Investment promotion can put a state in front of an investor, but it cannot create the capabilities that make some locations repeatedly attractive.
States that entered earlier often started from stronger bases, while newer entrants are still building the capacity to turn interest into investment. The result is a striking paradox: more states are competing for foreign capital, but the capital itself remains highly concentrated. Competition has only made the differences between state investment ecosystems more visible. The uneven geography of FDI ultimately reflects deeper differences in the productive capabilities of India’s states and cities.
Investment is more likely to take root where firms can draw on reliable infrastructure, skilled workers, efficient institutions, specialised suppliers and markets. These advantages accumulate, so investment returns to places where economic activity is already dense. This is where FDI becomes a question of competitiveness: what matters is not the volume of capital or a state’s ranking, but whether investment helps an economy use its people, capital and resources more productively. FDI can contribute to this, but is also attracted by the very capabilities it strengthens.
India’s challenge, therefore, is not merely to even out the FDI map but to broaden the foundations of competitiveness now confined to a few states, metros and clusters. For more regions to share in India’s growth, states must compete not on the largest incentive or most visible summit, but on building conditions in which firms grow more productive, investment takes root locally, and gains become higher incomes and better living standards. The real divergence India needs to narrow is not simply in where FDI flows, but in where the capabilities for sustained productivity and competitiveness are located.
* Amit Kapoor is Chair & Mukul Anand, Senior Researcher at Institute for Competitiveness. X: @kautiliya
