FDI inflows rise 17% to record $95 billion

NEW DELHI: Gross foreign direct investment (FDI) grew 16.7%, its fastest pace of expansion in six years, to a record $94.5 billion in 2025-26, helping reverse the four-year falling trend of net FDI.

Net FDI was estimated at $7.7 billion during the last financial year, compared with under $1 billion in the previous year. After excluding repatriation and disinvestment of $53.6 billion - which were 4% higher last year - from gross inflows, direct investment into the country is estimated to have increased 40.6% to $40.9 billion last year

On the other hand, there was an 18% increase in FDI from India, which rose to $33.3 billion. The gap between FDI into India and those from the country is the net inflows, which have been under pressure for the last few years as overseas investors, such as private equity players and the likes of Hyundai and LG, have sold their stakes in Indian entities and taken some of that money out of the country. Indian companies have also stepped up investments - 22% higher at $22.6 billion in 2025-26 - as they seek to be part of the global value chain.

While there have been two consecutive years of double-digit growth in gross FDI, many experts have argued that the absence of core AI activity has resulted in inflows growing at a slower pace. Govt is banking on a series of recent announcements for investment in the data centre business. Global tech giants Google, Microsoft and Amazon have together committed investments of around $70 billion on last count with Foxconn, Vinfast and Shell also lining up plans for another $65 billion or so.

In recent months, there has also been heightened activity in the financial services space with Japan's Mitsubishi UFJ Financial Group announcing a $4 billion investment in Shriram Finance and Japan's Sumitomo Mitsui Banking Corporation buying into Yes Bank. The recent easing of FDI rules in insurance, where 100% overseas investment is now permitted, is likely to further increase flows into the business.

Besides, with govt maintaining a tight vigil over Chinese investment and not allowing the likes of BYD to invest in an Indian venture has also slowed down inflows from the neighbouring country, where companies are sitting on large piles of cash. The tension in West Asia and how the US comes back with a new tariff plan are key factors weighing on the minds of CEOs of global corporations which are keen to diversify their production bases, but hold back till there is greater clarity.

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