NEW DELHI: Gross foreign direct investment (FDI) into India surged 16.7% in 2025-26, marking its fastest expansion in six years and reaching a record $94.5 billion. This robust growth helped reverse a four-year declining trend in net FDI, which is estimated at $7.7 billion for 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 than the previous year—from gross inflows, direct investment into the country is estimated to have increased 40.6% to $40.9 billion. On the other hand, FDI outflows from India rose 18% to $33.3 billion, driven by Indian companies stepping up investments abroad by 22% to $22.6 billion as they seek to integrate into global value chains.
Net FDI Under Pressure Despite Gross Growth
The gap between FDI inflows and outflows—net inflows—has been under pressure in recent years as overseas investors, including private equity players and firms like Hyundai and LG, sold stakes in Indian entities and repatriated funds. While gross FDI has seen two consecutive years of double-digit growth, experts argue that the absence of core AI activity has slowed the pace of inflows.
Government Bets on Data Centers and Tech Investments
The government is banking on recent announcements for investment in the data center business. Global tech giants Google, Microsoft, and Amazon have collectively committed around $70 billion, while Foxconn, Vinfast, and Shell have lined up plans for another $65 billion. In the financial services sector, Japan's Mitsubishi UFJ Financial Group announced a $4 billion investment in Shriram Finance, and Sumitomo Mitsui Banking Corporation bought into Yes Bank.
Policy Reforms and Geopolitical Factors
The recent easing of FDI rules in insurance, allowing 100% overseas investment, is expected to further boost inflows. However, the government's tight vigil over Chinese investment, blocking firms like BYD from investing in Indian ventures, has slowed inflows from China. Additionally, tensions in West Asia and uncertainty over US tariff plans are weighing on global CEOs' decisions to diversify production bases.
