FY26 Gross FDI at Record $95 bn — but Net Inflows Only $7.7 bn

Net FDI = Gross FDI Inflows − Repatriations by foreign companies − Overseas FDI by Indian companies

 1. Gross FDI

• Total foreign investment flowing into India — includes equity, reinvested earnings, and other capital. The headline number — often cited in government claims.

2. Repatriation

• Money taken back by foreign companies from India — in the form of profits, dividends, or sale of assets. Rising repatriation lowers net FDI.

3.Overseas FDI by Indians

• Investments made by Indian companies abroad (outward FDI). This is subtracted from gross inflows to arrive at net FDI — as it represents a capital outflow.

4. Net FDI

• The real addition to India's productive capital — what actually stays in the country for investment. Low net FDI despite high gross FDI = high repatriation + high outward investment.

WHY NET FDI IS LOW DESPITE RECORD GROSS FDI –

1. Rising repatriations Foreign companies are taking back more profits — $53.58B in FY26 vs $44.47B in FY24. Indicates higher profitability of existing MNC operations, but capital is leaving India.
2. Rising outward FDI Indian companies invested $33.29B abroad in FY26 vs $16.68B in FY24 — shows Indian corporate globalisation but reduces net domestic FDI.
3. Rupee pressure Low net FDI has contributed to ongoing pressure on the rupee's exchange rate — came close to breaching ₹97/dollar. Ended at ₹95.69/dollar on Friday (22 May 2026). Rupee is down 5% since the West Asia war started.
4. Global uncertainty West Asia conflict (Israel-Hamas-Iran theatre) has weakened global investor sentiment and put pressure on emerging market currencies including the rupee.
 

• In FY22, net FDI was ~$28B on gross of $84.84B. In FY26, net FDI is just $7.65B on gross of $94.53B — despite a higher headline number. The quality of FDI has deteriorated significantly.

POLICY IMPLICATIONS — WHAT THIS DATA MEANS

1.Quality vs quantity Record gross FDI is a positive signal of India's attractiveness, but without improving net FDI, it doesn't fully translate into productive domestic investment.
2. Rupee management RBI's intervention is necessary but costly — using forex reserves to defend the rupee reduces the buffer available for import financing and external shocks.
3. Need for reforms To retain more FDI (reduce repatriation), India needs to improve ease of doing business, reduce regulatory uncertainty, offer competitive tax regimes, and deepen local reinvestment incentives.
4. Outward FDI Rising outward FDI by Indian companies ($33.29B) is a sign of Indian corporate maturity and globalisation — but policymakers must ensure it complements, not substitutes, domestic investment.