Foreign firms halted India projects worth ₹2 lakh crore in Q1, 1,200% more than last year

Tariff-related uncertainty pushed foreign companies to pull the plug on nearly ₹2 lakh crore worth of projects in India in the first quarter of this financial year, more than 1,200% higher than the same quarter last year.

An analysis by The Hindu of data from the Centre for Monitoring Indian Economy (CMIE) shows that foreign private companies dropped projects worth ₹1.97 lakh crore in Q1 of 2025-26, the highest amount since at least 2010, the earliest date for which there is data, and 570% higher than the long-term quarterly average. 

The CMIE data further breaks up the dropped projects into those that have been abandoned entirely, shelved temporarily, stalled, or for which information is not available on why it was dropped. Given the recency of the data, the bulk of the dropped projects fall under the ‘lack of information’ category.

Tariff impact

According to economists, however, the reason is quite clear: tariff-related uncertainty. The period between April and June this year saw a lot of missed deadlines in terms of a ‘mini trade deal’ being announced between India and the U.S., which was supposed to address the issue of reciprocal tariffs imposed by the U.S. on Indian imports.

“This is very largely the impact of tariff uncertainties,” D.K. Srivastava, Chief Policy Advisor at EY India, told The Hindu. “Whether this will carry on will depend on whether these companies are from the U.S. or elsewhere. Mostly, if the investment was from U.S. companies, they would have dropped it. Apart from the tariffs, the U.S. President is also keen for these companies to move their investments back to the U.S.”

Mr. Srivastava, however, was confident that a large part of these investments would return once there was greater clarity on the tariffs. 

Pessimistic investors

The analysis further showed that this investment uncertainty was also reflected in new project announcements. The ratio of dropped projects to new project announcements — a rough metric of investment mood — surged to a value of 8.8 in Q1 of this year. The higher the figure, the more pessimistic the investors. This ratio was the highest since 2010.

The value of new projects announced by foreign companies in India in Q1 stood at ₹22,490 crore. While this was nearly 50% higher than in Q1 of last year, this is likely because the April-June 2024 quarter saw an overall investment slowdown due to last year’s general election. The value of new project announcements by foreign companies in Q1 was 56% lower than the long-term quarterly average.