India achieved a record ₹96.99 billion in gross FDI inflows during FY26, but this figure masks concerning trends in capital retention. According to reports from Business Standard, net FDI reached $7.84 billion in the first quarter of FY27, representing only about 25.6% of gross inflows - the highest share in eight quarters. This contrasts sharply with the historical pattern where net FDI averaged 54% of gross inflows between July-September 2011 and April-June 2022, compared to just 12% in the 16 quarters since then.
Repatriation has emerged as a significant concern, with 44% of gross inflows being repatriated in the June 2026 quarter - the lowest level since January-March 2025. As reported by Business Standard, this represents a dramatic shift from the historical average of 28% in the earlier 44-quarter period. Outward investment reached 31% of gross inflows, marking the lowest level in the current period. Reserve Bank of India Governor Sanjay Malhotra has characterized rising repatriation as a sign of a 'mature market' where investors can enter and exit easily, while former JNU professor Biswajit Dhar warns that this behavior suggests investors are behaving like short-term speculators rather than long-term capital providers.
Outward investment has become an increasingly significant drain on retained capital, averaging 30% of gross inflows since July-September 2022, up from 18% in the earlier period. According to Business Standard, Indian firms have continued acquiring overseas businesses, with recent transactions involving major companies like Dr Reddy's Laboratories, Zydus Lifesciences, Sun Pharma, Infosys, HCLTech, Wipro, Coforge, Airtel, Tata Steel, and PI Industries. Former chief statistician Pronab Sen calls this trend 'worrying', arguing that companies are earning substantial profits without investing commensurately at home.
Equity inflows reached a six-year high of $20 billion in the June 2026 quarter, with Japan overtaking Singapore as the top source for the first time in 15 years. As reported by Business Standard, this surge was primarily driven by MUFG Bank's acquisition of a 20% stake in Shriram Finance - the biggest foreign investment in an Indian financial company. Services now account for about 50% of equity inflows, with banking, insurance and other services attracting 35.5% and computer software and hardware accounting for 14.4%. Singapore, which had led for 36 of the past 60 quarters, now accounts for about 75% of equity inflows on average over the past ten quarters along with Mauritius, the Netherlands, the US and the UAE.
Despite the record gross FDI inflows, experts remain concerned about the quality of retained capital. RBI Deputy Governor Poonam Gupta recently indicated that gross FDI could exceed $100 billion in FY27, but former JNU professor Biswajit Dhar emphasizes that investors need confidence in market demand. According to Business Standard, Dhar argues that weak labour-market conditions and insufficient consumer demand are undermining long-term investment confidence, as companies struggle to find customers without stable jobs and incomes. The trend toward negative net FDI, where repatriation and outward investment together exceed gross inflows, has become increasingly frequent since July-September 2022, occurring four times since then, most recently in October-December 2025.
