India has become remarkably successful at attracting foreign capital. Gross foreign direct investment (FDI) inflows reached $81.04 billion in FY2024-25, 14% higher than a year earlier. Over 2014-25, India received $748.78 billion, 143% more than in the preceding eleven-year period. Manufacturing FDI alone rose 18% to $19.04 billion in FY2024-25. These are numbers worth celebrating. But they also invite a harder question: how much of the value created by this capital is ultimately owned by India?
FDI is useful because it brings capital, technology, management practices, export networks and access to global markets. Yet the economic objective cannot be to maximise inflows indefinitely. Capital is a means, not a measure of national capability. The real test is whether foreign investment creates domestic suppliers, Indian intellectual property, skilled employment, local research and globally competitive firms.
Consider electronics. India produced almost $60 billion of mobile phones in FY2024-25 and exported $21.7 billion, making smartphones its largest export product. This is a major industrial achievement. Yet the country continues to import large quantities of high-value components. Electronics exports can rise rapidly without domestic value addition rising at the same pace. Assembly creates jobs and exports; design, components, patents and brands create deeper and more durable economic rents.
The distinction matters because globalisation increasingly rewards control over intangible assets. In 2024, India-based applicants increased their patent applications worldwide by 19.1%, according to the World Intellectual Property Organization. That is encouraging. But India’s resident patent applications amounted to only 414 per $100 billion of GDP, against 4,977 in China and 4,150 in Japan. India is moving forward, but the innovation intensity of its economy remains far below the technological leaders.
The weakness is also visible in research spending. India’s gross expenditure on research and development remains around 0.64% of GDP, far below the roughly 2.7% global average. An economy aspiring to become a manufacturing and technology power cannot depend primarily on imported technology while underinvesting in the laboratories, universities and corporate research centres that generate the next generation of technology.
There is an even more revealing indicator: intellectual-property payments. India paid $16.3 billion for the use of intellectual property in 2024, according to World Bank data, while receipts were only about $1.7 billion. The gap does not mean foreign technology is undesirable; technology imports are essential during development. But it does demonstrate where bargaining power currently lies. India is more often paying for knowledge than earning from knowledge.
This is why the next phase of industrial policy should be judged by value capture, not merely investment announcements. A factory producing for a multinational should be encouraged to source from Indian firms, train Indian engineers, establish design centres and undertake progressively more R&D locally. Incentives should therefore reward not only incremental investment and production, but also domestic value addition, patents, export sophistication, supplier development and technology transfer.
The Production-Linked Incentive programmes have demonstrated that targeted policy can change corporate location decisions. The next question is whether policy can deepen industrial ecosystems around those investments. A semiconductor plant is valuable; a domestic semiconductor equipment industry, specialised materials suppliers, chip-design firms and research institutions around it are vastly more valuable. The objective should be to create clusters in which foreign firms become participants in Indian innovation networks rather than islands of imported technology.
This does not require protectionism. In fact, excessive localisation mandates can raise costs and make Indian exports less competitive. The better strategy is openness combined with capability-building. India should welcome multinational enterprises, but bargain for greater domestic spillovers through competition, infrastructure, skills, predictable regulation and incentives linked to measurable outcomes.
The opportunity is considerable. India’s cumulative FDI has already crossed the trillion-dollar mark when equity, reinvested earnings and other capital are considered. The challenge now is to convert this financial integration into technological integration. Indian companies themselves are increasingly investing overseas; outward FDI rose 17% year-on-year to $5.7 billion in July 2026. That is a sign of growing confidence. The next step is ensuring that Indian firms possess assets the world wants to acquire, license or replicate.
It would also improve productivity: domestic firms that learn, innovate and export tend to generate stronger spillovers, better wages and more resilient supply chains than subsidiaries focused narrowly on assembly over time.
The strategic ambition, therefore, should evolve from “Make in India” to “Invent in India, scale in India and own from India.” A country becomes economically powerful not simply when others build factories on its soil, but when companies across the world depend on its technologies, designs, platforms, patents and brands.
India has already demonstrated that it can attract capital. The harder task is to capture a larger share of the value that capital creates. That is the economic challenge of the next decade.
