Financial services companies attracted the lion\u2019s share of foreign capital flows into India in recent years, two Union government officials said citing finance ministry data.<\/p>\n
Investments by sovereign wealth funds in India\u2019s financial services sector climbed from \u20b92,688 crore in 2020-21 to \u20b916,228 crore in 2024-25, according to the officials, who requested anonymity. Investments by global pension funds, however, dropped from \u20b916,627 crore in 2020-21 to \u20b912,626 crore in 2024-25.<\/p>\n
In India\u2019s capital goods sector, net foreign portfolio investments (FPI<\/a>) by sovereign wealth funds jumped from \u20b9502 crore in 2020-21 to \u20b93,626 crore in 2024-25, with a steady climb each year, the officials said. Pension funds mirrored this upbeat momentum, increasing investments from \u20b91,497 crore in 2020-21 to \u20b95,647 crore in 2024-25.<\/p>\n The overall surge in investments by the specialised funds reflect global investors\u2019 growing conviction in India\u2019s industrial and infrastructure drive, bolstered by reforms, robust demand, and a steady improvement in the ease of doing business, one of the two officials said.<\/p>\n \u201cPension and sovereign wealth funds, traditionally cautious, are placing larger, more consistent bets on India\u2019s capital goods sector. That reflects confidence not only in the country\u2019s demand story but also in the predictability of its policy environment,” this official added.<\/p>\n Abu Dhabi and Singapore sovereign funds have been increasing their bets in India\u2019s services and healthcare sectors, while Canadian pension funds are deepening their hold on domestic highways and power assets. Singapore\u2019s sovereign wealth fund Temasek Holdings is backing India\u2019s digitization and consumer growth as part of a $10 billion plan.<\/p>\n The second official mentioned above attributed the rise in investments by global sovereign and pension funds to proactive government policy, including broadening of foreign direct investment limits, simplified regulatory frameworks, and targeted tax exemptions for long-term foreign funds. \u201cGlobal investors see India as one of the most-credible long-term bets,” the official said.<\/p>\n A spokesperson for the Union finance ministry didn\u2019t respond to emailed queries.<\/p>\n \n Key Takeaways\n <\/p>\n Growing confidence<\/strong><\/p>\n Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap Llp, said sovereign wealth funds and global pension funds channeling their patient, long-term capital into India underscored confidence in the economy\u2019s fundamentals, moderating inflation, steady growth, and deepening financial markets.<\/p>\n \u201cTheir growing presence in financial services and capital goods signals that global investors see India as a structural story, not just a cyclical trade. Unlike short-term portfolio flows, these investments add depth and stability to markets while reinforcing credibility,” he said.<\/p>\n \u201cThat said, global uncertainties\u2014tariff shocks, geopolitical risks, rupee weakness, and uneven FPI flows\u2014continue to weigh on sentiment despite India\u2019s rating upgrade,” Srinivasan added. \u201cIn this environment, the steady participation of sovereign wealth and pension funds acts as an important anchor, underlining that India\u2019s long-term prospects remain intact even as short-term volatility plays out.”<\/p>\n In recent years, Abu Dhabi Investment Authority has backed Lenskart<\/a> and Reliance Retail<\/a> from its $4-5 billion India fund; Singapore\u2019s GIC has invested $300 million in the domestic hospitality sector; and in March, Temasek acquired a 10% stake<\/a> in snacking and sweets company Haldiram<\/a> Snacks Food Pvt. Ltd for \u20b98,500 crore.<\/p>\n Canada Pension Plan Investment Board\u2019s India portfolio climbed to a record C$30 billion<\/a> (about $22.7 billion) in net assets in 2024-25. CPPIB and Ontario Teachers\u2019 Pension Plan Board have also invested in the National Highways Infrastructure <\/a>Trust.<\/p>\n Turbulence ahead<\/strong><\/p>\n India attracted foreign direct investment worth $81.04 billion in 2024-25, a 14% jump<\/a> from the year before, according to official data. However, after accounting for money repatriated out of India and all outward FDI, net FDI was $350 million, a 96% drop<\/a> from 2023-24.<\/p>\n That said, FDI in manufacturing rose 18% to $19.04 billion in 2024-25 from $16.12 billion in the previous year, accounting for about 23.5% of the total foreign inflows. The services sector accounted for 19% of the FDI inflows.<\/p>\n Over a longer period, India attracted $748.78 billion in cumulative FDI inflows between 2013-14 and 2024-25, marking a 143% surge over the preceding eleven-year period (2003-14), when foreign investment stood at $308.38 billion, government data show.<\/p>\n However, according to some analysts, slow global growth, geopolitical disruptions, and the US\u2019s high tariffs on Indian goods could temper the country\u2019s manufacturing momentum<\/a> built over the years.<\/p>\n In a recent report, Moody\u2019s Analytics said US tariffs of up to 50% on Indian goods would weigh on India\u2019s economy but would not crush it<\/a>.<\/p>\n Rating agency Crisil Ltd expects India\u2019s manufacturing sector to grow at 9% annually between FY25 and FY31, on average, up from 6% in the pre-pandemic decade.<\/p>\n Manufacturing\u2019s share in India\u2019s GDP is projected to rise to 20% by FY31 from 17% in FY25, supported by investments and efficiency gains, with services remaining the primary growth engine, Crisil said in its India Outlook report for FY26.<\/p>\n\n