India's foreign direct investment inflows reached $58.84 billion in FY 2025-26, marking an 18% increase from the previous financial year, according to the Department for Promotion of Industry and Internal Trade (DPIIT) data released on June 3, 2026. This performance demonstrates continued investor confidence in India's economy despite global uncertainties. Cumulative FDI inflows since April 2000 have reached an estimated $1.16 trillion, indicating the country's long-term attractiveness as an investment destination. The figure includes equity inflows, reinvested earnings, and other capital contributions, with Singapore retaining its position as India's largest source of FDI equity capital at $19.8 billion during FY 2025-26. Notably, FDI from the United States more than doubled during the last fiscal year, rising to $11.17 billion in 2025-26 from $5.45 billion in 2024-25, as reported by Business Standard.
RBI Deputy Governor Poonam Gupta projected that gross FDI inflows may cross $100 billion in FY27, citing strong investment momentum despite global uncertainty. Speaking at the post-monetary policy press conference, Gupta said gross FDI inflows had reached $95 billion in FY26, indicating that foreign capital flows are likely to remain robust and could surpass the $100 billion mark this year. "Gross FDI flows were $95 billion in 2025-26, can be much more this year, for all we know. Certainly top $100 billion, can go up to $110 billion, $120 billion, if not more," Gupta stated. She emphasized that this represents a secular increase rather than a one-year phenomenon, with healthier inflows expected in coming years as well.
India is reviewing its bilateral investment treaty (BIT) template to make it more attractive, according to officials aware of the matter, as the West Asia crisis sharpens focus on drawing in more foreign capital. The government is examining whether to relax the five-year timeline for foreign investors, required under the usual treaty template, to first exhaust Indian legal remedies before pursuing global arbitration for dispute settlement. Under its 2024 investment pact with the UAE, India shortened this requirement to three years, signalling a special bilateral relationship. As per officials, the 2016 template needs to be revised despite being drawn up only seven years ago, reflecting the evolving global investment landscape and India's need to stay competitive.
India has updated its foreign investment framework to improve ease of doing business while maintaining regulatory safeguards. A notable development in 2026 was the targeted relaxation of restrictions under Press Note 3 (PN3), which governs investments from countries sharing a land border with India. Under the revised rules, minority investments with beneficial ownership below 10 percent can enter through the automatic route, provided they do not confer control and comply with applicable sectoral conditions. The central government has introduced a 60-day fast-track approval mechanism for proposals in strategic manufacturing sectors, including electronics components, capital goods, semiconductors, and solar manufacturing inputs. Additionally, the Reserve Bank of India is likely to classify select long-duration government securities under the Fully Accessible Route, enabling overseas investors to invest in these bonds without any ownership restrictions, according to a Bloomberg report.
Computer software and hardware emerged as the largest recipient of FDI equity inflows in FY 2025-26, attracting $13.9 billion, a sharp increase from $7.8 billion in the previous year. The services sector remained a key investment destination with $10 billion in inflows, reinforcing India's position as a global hub for technology services, business process management, financial services, and digital operations. Maharashtra remained India's leading destination for foreign direct investment in FY 2025-26, attracting $18.4 billion in FDI equity inflows, while Karnataka emerged as the strongest performer among major states, with inflows nearly doubling to $12.9 billion. The rise in investments across manufacturing-oriented sectors such as automobiles and pharmaceuticals reflects growing confidence in India's industrial capabilities.
India is already planning to scrap the capital gains tax on investments in government securities by foreign portfolio investors. The finance ministry is actively working on these issues, with officials stressing that "this is also the time to take the bull by the horns, because we need sustained foreign investments—a whole lot of them." The government is also likely to unveil additional steps aimed at boosting foreign capital inflows. Currently, foreign investors are required to pay a 12.5% long-term capital gains tax on listed equities and bonds held for more than a year, with interest income from government securities subject to a 20% withholding tax. The concessional tax rate of 5% that was previously available to such investors was withdrawn by the government in 2023. India is pursuing BITs with over two dozen nations and blocs, including the EU, Russia, Saudi Arabia, the US, Qatar and Oman, with decisions on these issues to be made after broader consultations.
