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Alphabet Inc.’s massive data centre project has emerged as one of the biggest drivers of the surge in foreign direct investment (FDI) into India in 2025. Total FDI inflows rose 44 per cent to $39 billion last year, citing the UN Trade and Development (UNCTAD) annual investment report released on Tuesday.
The increase was largely driven by Alphabet’s $14.5 billion data centre project and Polish developer Hynfra’s $4 billion green hydrogen investment, both located in Andhra Pradesh, a state governed by a key ally of Prime Minister Narendra Modi.
However, the figures suggest that the rise in investment was fuelled by a handful of mega projects rather than broad-based corporate spending. In contrast, domestic private investment—which is critical for joint ventures and long-term industrial growth—remained subdued.
India has also lagged behind several competing markets in attracting AI-related investment. These foreign inflows come at a crucial time, as policymakers seek stable sources of overseas capital to help finance the country’s growing investment needs.
India’s vulnerability as the world’s third-largest oil importer also underscores the importance of sustained FDI. Rising global energy prices can put pressure on the rupee and widen the country’s import bill. Unlike portfolio flows, which can reverse rapidly during periods of market volatility, foreign direct investment is widely regarded as a more resilient source of capital that supports long-term economic growth, employment and export expansion.
Drop in value of Greenfield Projects
Despite the increase in overall FDI, UNCTAD data showed that the value of announced greenfield projects declined by around 33 per cent in 2025 to approximately $74 billion, down from more than $111 billion a year earlier, while the total number of projects also edged lower.
The slowdown was most pronounced in manufacturing, where the value of announced investments fell to $27 billion, nearly halving from $65 billion in 2024. The sharpest declines were recorded in capital-intensive industries. However, the relatively modest drop in the number of projects suggests companies chose to scale back investment sizes rather than cancel projects altogether.
Electronics tops in manufacturing
Electronics remained one of India’s largest manufacturing sectors by both investment value and the number of announced projects, despite easing from the record levels seen in 2024.
The services sector proved more resilient, with greenfield investment surpassing manufacturing as companies continued expanding their digital infrastructure. Financial services also witnessed a revival in investment activity.
Reflecting growing confidence in India’s digital economy, Amazon last month announced an additional $13 billion investment to expand its artificial intelligence and cloud infrastructure in the country.
According to UNCTAD, India’s policy focus remains centred on advancing manufacturing, strengthening infrastructure and deepening integration into global value chains. However, the agency cautioned that tariff uncertainty, supply chain realignments and weaker global investment sentiment continue to weigh on new manufacturing and infrastructure commitments.
