THIRUVANANTHAPURAM: Foreign Direct Investment (FDI) in Kerala declined in the 2025-26 financial year even as its neighbouring states posted strong growth, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT) on Tuesday.
A review of past data showed that Kerala’s share of India’s total FDI has stayed under 1% over six years, with the smallest gain among South India’s five major states.
In 2025-26, Kerala’s FDI equity inflow was Rs 3,281.21 crore, a 1.5% dip from the previous year’s Rs 3,330.26 crore. Karnataka’s inflow more than doubled to Rs 1,12,869.88 crore, and that of Tamil Nadu grew about 32% to Rs 41,197.97 crore in 2025-26. Andhra Pradesh overtook Kerala, with its FDI more than doubling — from Rs 1,957.05 crore to Rs 5,354.40 crore.
C Veeramani, director of Centre for Development Studies, said Kerala needs a dedicated agency to attract and facilitate FDI.
“Kerala has several favourable conditions that big, high-tech companies look for. These include a pollution-free environment, highly skilled labour, and relatively better living conditions. But the state lacks a clear policy framework and a proactive approach, including on policy,” said Veeramani.
“It is time to shift from a neutral stance to a proactive one. An exclusive agency to facilitate FDI is the need of the hour,” he said.
‘State must work to attract greenfield investments’
According to Veeramani, foreign companies would face several hurdles, from land acquisition to clearances from different authorities. It is in this context that an exclusive agency gains significance, he said.
“Kerala should work on attracting more greenfield investments. Also, it has huge potential for Global Capability Centres.”
Besides Kerala, Telangana was the only other southern state which recorded a YoY decline. Its FDI inflow dropped about 21% to Rs 19,930.29 crore ($2,252.86 million), even as it remains well ahead of Kerala in absolute terms.
Among the states, Maharashtra retained the top spot in FY 2025-26. But its share, 31.30%, was down from 39.16% in the previous year. Karnataka too retained its second position and its share sharply rose from 13.23% to 21.99%.
Over the past six financial years, Kerala’s share in India’s total FDI stayed under 1%, inching up from 0.36% to 0.64%. The state’s best year was FY2024-25, when its share touched 0.79%, before slipping this year. During the period, Tamil Nadu’s share grew from 3.89% to 8.03%, Karnataka’s from 12.85% to 21.99%, Telangana’s from 1.95% to 3.83%, and Andhra Pradesh’s from 0.14% to 1.03%. Kerala had the smallest overall gain among the major five states in South India.
Veeramani said the top sectors attracting FDI in the country are Computer Software & Hardware and Services. “While some foreign IT companies have a presence in Kerala, their headquarters are mostly located in cities like Bengaluru, Chennai, Hyderabad and Mumbai. FDI is recorded in the state where a company is headquartered, not where it operates,” he added.
India’s total FDI equity inflow in 2025-26 was Rs 5,16,935.85 crore ($58,846.27 million). The top sector, Computer Software & Hardware, attracted Rs 1,22,279 crore ($13,946 million), followed by the Services Sector, Rs 87,873 crore ($10,010 million).