Maharashtra and Karnataka Attract Over Half of India’s FDI in FY25: What It Means for the Rest of the Country

In a key economic update, Maharashtra and Karnataka together accounted for 51% of India’s total Foreign Direct Investment (FDI) inflows in the financial year 2024–25 so far. This heavy concentration of investment in just two states raises questions about regional equity, highlighting the need to channel more growth opportunities toward other parts of India, especially Tier 2 cities looking to scale up.

FDI Inflows Continue to Concentrate
Both Maharashtra and Karnataka have consistently led in attracting foreign investments due to their strong infrastructure, business-friendly policies, and access to skilled talent. Cities like Mumbai, Pune, and Bengaluru are already well-established global investment destinations in sectors such as finance, IT, manufacturing, and mobility.

This trend, however, reveals a widening gap between top-performing states and the rest of the country.

Why These States Lead
Karnataka has become a global tech powerhouse, with Bengaluru at the heart of India’s digital and innovation ecosystem. Maharashtra, on the other hand, remains a major financial and industrial hub, benefiting from Mumbai’s global connectivity and Pune’s growing manufacturing base.

Their readiness to support investors with faster clearances, policy incentives, and modern logistics continues to attract global businesses.

The Other Side of the Story
States in northern, eastern, and central India continue to struggle with attracting significant FDI. Infrastructure bottlenecks, slower administrative processes, and limited investor awareness have held them back. Cities like Lucknow, Patna, and Raipur, despite growing in population and ambition, often miss out on major foreign investments.

This uneven spread of investment limits inclusive growth and job creation across regions.

Opportunities for Tier 2 Cities
Smaller cities such as Nagpur, Coimbatore, Indore, and Bhubaneswar have started showing promise, with improvements in infrastructure, digital connectivity, and startup activity. These cities can become future investment hotspots if backed by clear policies, industrial zones, and ease-of-doing-business reforms.

A push toward decentralizing investment can create balanced growth and reduce over-dependence on metro cities.

Conclusion
While Maharashtra and Karnataka’s success in attracting over half of India’s FDI signals global investor confidence, it also points to a deeper need for balanced regional development. India’s economic future depends on empowering its Tier 2 and Tier 3 cities — by creating environments where businesses thrive beyond the traditional hubs. This shift could unlock new opportunities for millions and ensure that the benefits of growth are truly nationwide.