India likely to close FY26 with gross FDI of more than $90 billion, says CEA Nageswaran

India's Chief Economic Adviser (CEA) V. Anantha Nageswaran stated that India is likely to close FY2025-26 with gross FDI exceeding $90 billion — representing...

What Happened

India's Chief Economic Adviser (CEA) V. Anantha Nageswaran stated that India is likely to close FY2025-26 with gross FDI exceeding $90 billion — representing approximately 2% of GDP for the first time in any fiscal year.
Gross FDI inflows for the April–February period of FY26 already reached $88.3 billion, a year-on-year increase of 18.1% over the corresponding period of FY25.
This marks a structural breakout from the $70–80 billion range seen in the preceding four fiscal years, and an approximately 10% increase over FY2024-25's gross FDI.
The gross FDI figure represents total equity, reinvested earnings, and other capital inflows before netting out repatriation of capital and outward FDI by Indian entities; net FDI remains under pressure from higher repatriation and rising outward investments.
Manufacturing, computer software and hardware, financial services, business services, and communication services together account for over two-thirds of equity inflows.

Static Topic Bridges

Foreign Direct Investment (FDI): Concepts and India's Policy Framework

FDI refers to an investment made by a foreign entity to establish a lasting interest and significant degree of influence in an enterprise resident in another economy. It is distinguished from Foreign Portfolio Investment (FPI) by its long-term nature and management control (typically 10% or more equity ownership). India's FDI policy is regulated by the Department for Promotion of Industry and Internal Trade (DPIIT), under the Foreign Exchange Management Act (FEMA), 1999.

FDI routes in India:
Automatic Route: No prior government approval required; investor/company notifies RBI post-investment.
Government/Approval Route: Prior approval of the relevant Ministry required.
Prohibited sectors: Lottery, gambling and betting, chit funds, Nidhi companies, real estate business (excluding real estate investment trusts), manufacturing of tobacco products, atomic energy.
FDI in Defence: Up to 74% under automatic route; above 74% via government approval.
FDI in Insurance: 74% under automatic route (raised from 49% in 2021).
FDI statistics are published by DPIIT (sectoral/origin data) and RBI (BoP data).

Connection to this news: India reaching 2% of GDP in gross FDI for the first time signals a structural improvement in investor confidence — a key indicator monitored in UPSC's economic survey and budget context.

Gross FDI vs. Net FDI: The Distinction

Gross FDI is the total foreign capital entering India (equity inflows + reinvested earnings + other capital), without deducting outflows. Net FDI = Gross FDI inflows minus (repatriation/disinvestment by foreign investors + outward FDI by Indian companies).

India's net FDI has been under pressure in recent years due to:
Increased profit repatriation by mature foreign investments.
Rising outward FDI by Indian corporations expanding globally.
For policy purposes, DPIIT focuses on gross FDI equity inflows as a measure of investor attraction; RBI tracks net FDI for Balance of Payments (BoP) analysis.
In FY2024-25, India recorded $81.04 billion in gross FDI inflows (DPIIT data).
FY26's $90+ billion would mark the highest gross FDI in India's history.

Connection to this news: The headline $90 billion figure refers to gross FDI — students should be aware that net FDI may tell a different story about capital retention, as Morgan Stanley noted that net FDI remains near all-time lows despite record gross inflows.

FDI and India's Balance of Payments (BoP)

The Balance of Payments is a systematic record of all economic transactions between residents of a country and the rest of the world over a specific period. It comprises: - Current Account: Trade in goods (merchandise), services, primary income (investment income), secondary income (remittances). - Capital Account: Capital transfers (very small in India's case). - Financial Account: FDI, FPI, external commercial borrowings, official reserve transactions.

FDI inflows appear as credits in the Financial Account of India's BoP.
India's current account deficit (CAD) has historically been financed by FDI and FPI inflows; stable FDI is preferred over volatile FPI for BoP sustainability.
India's BoP is compiled and published quarterly by the RBI.
FDI also contributes to capital formation, technology transfer, and employment — unlike FPI which is primarily speculative and short-term.

Connection to this news: A robust $90 billion gross FDI strengthens India's BoP position, helps finance the current account deficit, and signals long-term investor confidence in India's economic fundamentals.

India as an FDI Destination: Key Enablers

India's improvement in FDI attraction has been driven by several structural reforms over the past decade: GST unification, insolvency resolution (IBC 2016), FDI policy liberalisation, Production Linked Incentive (PLI) schemes, infrastructure development (PM Gati Shakti), and digital public infrastructure.

PLI schemes across 14 sectors have been a major FDI magnet, particularly in electronics, pharmaceuticals, specialty chemicals, and white goods.
India improved its World Bank Ease of Doing Business ranking from 142nd (2014) to 63rd (2019) before the Bank discontinued the index.
Top FDI source countries: Singapore, Mauritius, USA, Netherlands, Japan — with many routing via Singapore/Mauritius for tax treaty benefits.
Top FDI destination sectors in FY25: Services (19%), Computer Software & Hardware (16%), Trading (8%), Manufacturing (highest absolute value, led by electronics).

Connection to this news: The $90 billion milestone validates the long-term structural case for India as a manufacturing and services investment hub — often framed as "China+1" diversification by global MNCs.

Key Facts & Data

FY26 gross FDI projection: >$90 billion (~2% of GDP — first time)
April–February FY26 gross FDI already: $88.3 billion (+18.1% YoY)
FY2024-25 gross FDI: $81.04 billion (DPIIT); $80.3 billion (trailing 12-month as of Jan 2025)
FY26 trailing 12-month gross FDI (Jan 2026): $90.8 billion (+13% YoY, Morgan Stanley)
4-year prior average range: $70–80 billion per year
Sectors leading equity inflows (FY25): Services (19%), Computer Software & Hardware (16%), Manufacturing (largest absolute growth)
FDI routes: Automatic route (up to sector-specific ceiling) | Government/Approval route (beyond cap or in sensitive sectors)
DPIIT full form: Department for Promotion of Industry and Internal Trade
Legal framework: FEMA 1999; DPIIT FDI Policy; RBI FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations
CEA full form: Chief Economic Adviser — head of the Economic Division, Ministry of Finance