Karnataka emerged as the fastest-growing major state for foreign direct investment (FDI) in the last financial year, with equity inflows nearly doubling to $13 billion, according to official data shared in Parliament and reported by Business Today. The surge was driven by technology investors and global capability centres (GCCs) flocking to India's Silicon Valley, even as the top destination Maharashtra experienced a decline.
State-Wise FDI Trends
Maharashtra, the largest recipient of FDI in recent years, saw a dip in equity inflows after two years, according to the data. Gujarat remained flat at $5.7 billion, retaining the third spot among states. Other states that recorded significant increases in equity inflows include Haryana, Tamil Nadu, Rajasthan, Uttar Pradesh, Andhra Pradesh, and Punjab. In contrast, Telangana saw a decline.
| State | FDI Equity Inflows (FY26) | Trend |
|---|---|---|
| Karnataka | $13 billion | Nearly doubled |
| Gujarat | $5.7 billion | Flat |
| Maharashtra | Not disclosed | Decline after 2 years |
| Telangana | Not disclosed | Decline |
| Other major states | Not disclosed | Significant increase |
Data as per official figures shared in Parliament.
Sectoral Breakdown
Sector-wise, computer software and hardware attracted the highest FDI at $13.9 billion, followed by the services sector (including finance, banking, and insurance) at $10 billion. Together, these two sectors cornered nearly 40% of total equity inflows, which stood at $58.8 billion for India in FY26—a 17.6% increase from the previous year.
| Sector | FDI Inflows (FY26) | Notable Change |
|---|---|---|
| Computer software/hardware | $13.9 billion | — |
| Services (finance, banking, insurance) | $10 billion | — |
| Food processing | $3 billion | Nearly 6x growth |
| Automobile | $2.5 billion | Robust growth |
| Drugs and pharmaceuticals | $1.9 billion | Robust growth |
| Education | $1.3 billion | Robust growth |
| Electronics | $1.1 billion | Nearly halved |
| Air transport | $383 million | Down nearly 70% |
The food processing industry saw a remarkable jump of nearly six times to $3 billion. Other sectors like drugs and pharmaceuticals ($1.9 billion), automobile ($2.5 billion), and education ($1.3 billion) also recorded robust growth. However, FDI in air transport plunged nearly 70% to $383 million, while the electronics sector nearly halved to $1.1 billion.
Drivers of Growth
A large part of the investments was driven by technology companies, with money flowing into data centres and global capability centres (GCCs), as well as into e-commerce giants such as Amazon and Flipkart, according to the official data. The rise in Karnataka's FDI underscores the state's continued dominance as a hub for tech and innovation, attracting global firms seeking to expand their footprint in India.
Implications for Investors and Corporates
The data signals a shifting landscape in India's FDI geography, with Karnataka outpacing traditional leaders like Maharashtra. For corporates and investors, the trend highlights the growing importance of tech infrastructure and GCCs as drivers of foreign investment. The decline in Maharashtra and Telangana may prompt strategic reassessments, while flat inflows in Gujarat suggest stable but unspectacular growth. The strong performance of food processing and pharmaceuticals also points to emerging opportunities in non-tech sectors. With India's total FDI rising 17.6% to $58 billion, the country remains an attractive destination, but state-level dynamics are becoming increasingly important for investment decisions.
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