India is not simply a “+1” to the “China+1” strategy; instead, according to Kotak, its proportion of net FDI inflows from international entities has returned to pre-COVID levels.

Despite the implementation of the China+1 strategy and various reforms, global corporations remain cautious about investing in China, yet India has not experienced a significant surge in foreign direct investment (FDI), as observed in a report by Kotak Institutional Equities.

India’s share of global net FDI inflows from foreign entities has dropped below 2019 levels. In the nine months leading up to December 31 in FY24, India witnessed a notable decline in net FDI inflows to $8.5 billion, a significant decrease from the peak years of 2020-21 when it ranged between $43-44 billion.

Kotak further noted that the recent decline in gross FDI inflows to India reflects a broader slowdown in global capital flows since 2021. This trend could be attributed to escalating geopolitical tensions between a US-led ‘economic’ bloc and China, along with government-backed industrial policies focusing on strategic sectors and the tightening of global central bank liquidity.