Gross FDI into India hit new record of $95 billion in FY26, but net inflows only $7.7 billion

India's gross Foreign Direct Investment (FDI) inflows reached a record $95 billion in FY2025–26, surpassing the previous high and reflecting strong investor ...

What Happened

India's gross Foreign Direct Investment (FDI) inflows reached a record $95 billion in FY2025–26, surpassing the previous high and reflecting strong investor interest in the Indian economy.
Despite the record gross figure, net FDI inflows (gross inflows minus repatriation and outward FDI by Indian companies) stood at only $7.7 billion — a sharp divergence that highlights the growing scale of profit repatriation and Indian firms' overseas investments.
The Department for Promotion of Industry and Internal Trade (DPIIT) tracks gross FDI, while the Reserve Bank of India (RBI) tracks net FDI in the balance of payments.
The gap between gross and net FDI is an important indicator of the quality and long-term character of investment inflows, and has significant implications for the current account and rupee stability.

Static Topic Bridges

Foreign Direct Investment in India: Policy Framework

Foreign Direct Investment refers to investment made by a resident of one country in the productive assets of another country with the intention of establishing a lasting interest and managerial control. In India, FDI policy is governed by the Foreign Exchange Management Act (FEMA), 1999, and administered by DPIIT (Department for Promotion of Industry and Internal Trade) under the Ministry of Commerce and Industry, along with RBI.

Automatic Route: FDI up to the sectoral cap is permitted without prior government approval in most sectors. This route covers more than 90% of all FDI inflows.
Government/Approval Route: FDI in sensitive sectors (defence above 49%, multi-brand retail, broadcasting, etc.) requires approval of the relevant ministry or the Foreign Investment Facilitation Portal (FIFP).
Prohibited sectors: Lottery, gambling, chit funds, Nidhi companies, real estate (excluding townships and SEZs), tobacco manufacturing, atomic energy.
Key sectors attracting FDI: Services, computer software and hardware, telecommunications, trading, construction, automobile, pharmaceuticals, chemicals.
India consistently ranks among the top 5 global FDI destinations.

Connection to this news: The record gross FDI of $95 billion reflects India's improved ease-of-doing-business ranking, sectoral liberalization, and its role as a China+1 manufacturing destination. The large gap with net FDI, however, points to structural factors like high profit repatriation and the growing scale of Indian outward investment.

Gross FDI vs. Net FDI: Understanding the Divergence

Gross FDI (as tracked by DPIIT) counts all equity inflows into India, including reinvested earnings and inter-company loans, before any deductions. Net FDI (as tracked by RBI in the Balance of Payments) = Gross FDI inflows minus (repatriation/disinvestment + outward FDI by Indian companies). A large gross-to-net gap signals that foreign companies are repatriating significant profits or returning capital, and/or that Indian companies are rapidly expanding overseas.

Outward FDI by Indian companies surged to over $35 billion in FY26, driven by acquisitions and overseas expansions by Indian multinationals.
Profit repatriation by foreign subsidiaries has been rising as established businesses in India mature and dividend policies normalize.
Net FDI is more relevant for assessing its impact on the current account deficit (CAD) and external sector stability. A thin net FDI means the current account requires more financing from portfolio flows (FPI), which are more volatile.
The divergence is not unique to India — it is a global feature of maturing FDI relationships — but the magnitude in FY26 is notable.

Connection to this news: The $95 billion gross vs. $7.7 billion net gap underscores that headline FDI numbers, while impressive, may overstate the actual incremental productive capital entering India. Policymakers and analysts must track net FDI for accurate external sector assessment.

FDI and India's External Sector: Balance of Payments Implications

The Balance of Payments (BoP) is a systematic record of all economic transactions between residents of a country and the rest of the world. The Current Account records trade in goods (trade balance) and services, and income flows (including profit repatriation). The Capital/Financial Account records FDI, FPI, and other investments. Healthy net FDI is preferred over FPI for financing the current account deficit, as FDI is "sticky" (long-term productive investment) while FPI can exit rapidly, causing exchange rate volatility.

India's current account deficit (CAD) typically requires external financing from FDI + FPI + NRI deposits + ECBs.
A low net FDI of $7.7 billion means India is more reliant on volatile FPI flows to balance its BoP.
India's outward FDI reflects the growing global ambitions of Indian corporations — a positive structural signal for India's international economic integration.
DPIIT's FDI tracking (gross) is used for promotional and policy purposes; RBI's net FDI figures are used for macroeconomic analysis.

Connection to this news: While record gross FDI signals India's attractiveness as an investment destination, the thin net FDI figure is a cautionary note on external sector resilience — particularly if global risk appetite shifts and FPI flows reverse.

Key Facts & Data

Gross FDI inflows in FY26: ~$95 billion (record high)
Net FDI inflows in FY26: ~$7.7 billion
Gross FDI in April–February FY26: $88.3 billion (18.1% year-on-year jump)
Indian outward FDI in FY26: ~$35+ billion (surged substantially)
FDI tracking bodies: DPIIT (gross), RBI (net, in BoP)
Primary FDI routes: Automatic Route (90%+ of inflows) and Government Approval Route
India's FDI policy framework: FEMA 1999 + DPIIT consolidated FDI policy
Key attracting factors: China+1 strategy, ease of doing business improvements, large domestic market, sectoral liberalization
Prohibited FDI sectors include: Lottery, gambling, chit funds, tobacco, atomic energy
FDI equity inflows in FY25: ~$54.3 billion (gross, for comparison)