India recorded $38.89 billion in gross FDI inflows during 2025, marking a 44% surge from the previous year's $27.09 billion, according to the United Nations' World Investment Report 2026. However, the country faces a significant paradox where net FDI stood at just $7.84 billion in the April-June quarter, representing only 25% of gross inflows. This imbalance is driven by substantial outflows, with repatriation accounting for $13.42 billion - the fifth-highest quarterly figure for such withdrawals by foreign investors on record since 2011. Additionally, outward FDI by Indian companies added another $9.41 billion, together consuming nearly three-fourths of the capital that entered the country.
The most concerning trend is the dramatic increase in repatriation activity, which has grown from roughly 20% of gross inflows between 2011 and 2015 to often touching half of gross inflows over the past five years, sometimes exceeding it. In the latest quarter, repatriation stood at close to 43% of gross inflows. According to Business Standard, this represents a significant shift in foreign investor behavior, with RBI Governor Sanjay Malhotra describing the rise as a sign of a 'mature market' where foreign investors can enter and exit with relative ease. Since 2011, quarterly net FDI has turned negative five times, with the first instance occurring during Covid-19 in April-June 2020.
The composition of India's FDI sources has undergone significant changes over recent years. Mauritius, once the single largest source of FDI, accounting for nearly half of all inflows in FY11, has declined to just over 11% in FY26. Singapore has emerged as the new dominant source, now accounting for more than a third of FDI in India. Meanwhile, the United States' share in inflows crossed 20% in FY21 before declining steadily, though it showed improvement in the April-June quarter. As reported by Business Standard, the RBI's monthly bulletin for August reveals a notable overlap between sources of India's inward FDI and outward investment destinations, with Singapore, Mauritius and the United States topping both categories.
The breakdown by sector reveals contrasting investment trends between inward and outward flows. According to Business Standard, manufacturing draws the largest share of FDI, followed by electricity and other energy generation, computer services, and communication services. In contrast, outward investment is concentrated mostly in financial, insurance and business services, followed by manufacturing. This sectoral distribution suggests different strategic priorities for foreign investors versus Indian companies seeking overseas expansion.
Despite the record inflows, India's FDI performance faces significant challenges in translating investment into economic growth. RBI Deputy Governor Poonam Gupta has indicated that gross FDI could cross $100 billion in FY27, but as reported by Business Standard, the gains would show up in the country's economy only if reinvested earnings grew faster and repatriation slowed. The current imbalance between inflows and outflows, particularly the high repatriation levels, presents a fundamental challenge to maximizing the economic impact of foreign investment in India.
