In a striking turn of events, the flow of investments from state-owned investors (SOIs) into India plummeted dramatically in 2025, with a staggering year-on-year decline of over 70%. This sharp drop is part of a broader trend where global long-term investors are shifting their focus away from emerging markets, redirecting their capital towards more developed economies. According to data compiled by Global SWF, this shift highlights the changing landscape of international finance.
This retreat can be attributed to several factors, including rising interest rates and geopolitical instability, alongside a growing preference for investment opportunities in areas such as digital infrastructure, data centers, and artificial intelligence (AI). The total amount of capital invested by SOIs in India fell from $20.1 billion in 2024 to just $5.7 billion in 2025, representing one of the most significant declines witnessed in recent years.
Moreover, India's share of SOIs' global investments has sharply decreased, dropping to approximately 2% in 2025 from 9.5% the previous year and 7.6% in 2023. A particularly notable decline occurred among Gulf-based state-owned investor funds, whose investments in India fell to $1.38 billion in 2025, down from $4.32 billion in 2024, decreasing to nearly one-third of the previous year's levels.
In response to these trends, India is actively positioning itself as an attractive long-term destination for sovereign capital. Initiatives such as the Gujarat International Finance Tec-City (GIFT City), infrastructure investment trusts (InvITs), and production-linked incentive (PLI) schemes are designed to draw in foreign investments.
Diego Lopez, the founder and managing director of Global SWF, remarked, "The disappointing flows into India and other emerging markets in 2025 were primarily due to the pivot of attention and capital towards US funds and assets. There is immense potential for India to attract more capital from sovereign wealth funds (SWFs) and public pension funds (PPFs), but successful collaboration with local partners is essential—an aspect demonstrated by the National Infrastructure Investment Fund (NIIF)."
He also mentioned that GIFT City successfully attracted the Abu Dhabi Investment Authority (ADIA) and Saudi Arabia's Public Investment Fund (PIF) to establish offices there, but emphasized the necessity for these efforts to be complemented with tangible, investable opportunities.
On a broader scale, global investments by SOIs rose by 32% in 2025, reaching $278 billion, with around half of that total, or $132 billion, directed towards the United States, according to Global SWF's 2026 Annual Report. Specifically, ADIA allocated $916 million to India in 2025, a decrease from $2.19 billion in 2024, while Qatar Investment Authority (QIA) increased its investment to $225 million from $150 million the year before.
Notably, Mubadala, which had previously committed over $1 billion in 2024, and the Kuwait Investment Authority (KIA), which invested $969 million that year, did not report any investments in India for 2025.
In a recent announcement, Abu Dhabi-based Mubadala Investment Company revealed plans to enhance its exposure to Asia, aiming to increase it to nearly 25% of its total portfolio over the next decade. Currently, Asia constitutes about 13% of Mubadala's $330 billion assets under management (AUM).
Some significant deals made by ADIA in India last year included a joint investment of $877 million in IDFC First Bank alongside private equity firm Warburg Pincus and a $200 million allocation to the medical devices company Micro Life Sciences (Meril).
But here's where it gets controversial: as global economic dynamics shift, will India be able to reclaim its stature as a prime destination for SOI investments? What strategies should India adopt to reverse this trend? We invite you to share your thoughts on this pressing issue!
