In financial year 2025-26, gross FDI into India was a record ~$95 billion - $94.84 billion as per DPIIT/Ministry of Finance (Lok Sabha answer, 20 July), and $94.53 billion as per IE citing RBI data (22 May) - while net FDI was only $6.9-7.7 billion. Net FDI improved to $6.95 billion from $0.96 billion in 2024-25 (Lok Sabha answer), yet it is well below the levels of earlier years; this very tension between record gross inflow and weak net inflow is the much-discussed economy story of 2026.
Why Net Fell: Repatriation and Outward Investment
Net FDI = gross FDI - repatriation by foreign companies - outward investment by Indian companies (ODI). As per RBI data (IE), in 2025-26 repatriation was $53.58 billion (2024-25: $51.49 billion; 2023-24: $44.47 billion) and ODI by Indian companies was $33.29 billion (2024-25: $28.17 billion; 2023-24: $16.68 billion - doubled in two years). The government's explanation (Lok Sabha answer): rising repatriation shows that India is "giving strong returns along with attracting capital", and with the liberalised ODI rules of 2022 Indian companies are expanding their global presence - "a strengthening of the economy in the long run". On the questioner's (Manish Tewari's) concern - the "quality" of investment: long-term manufacturing investment versus financial investment/SPV shareholding - the government gave a sector-wise table, not a quality assessment.
The Method of the Figures: How to Read Which Number
Three net figures are in circulation for the same year: IE's $7.65 billion from RBI monthly data (22 May), $6.9 billion from RBI's BoP press release (8 June), and $6.95 billion from the Lok Sabha answer (20 July) - the difference is of method and revision; read them with source and date. There are two gross figures too: RBI-based $94.53 billion and DPIIT-based $94.84 billion. As per DPIIT, equity FDI in FY26 rose 18% to $58.84 billion; investment from the US more than doubled to $11.17 billion (FY25: $5.45 billion), with strong flows from Singapore as well (ET).
External Pressure: Rupee, Intervention and Capital Flows
Weak net FDI has been one factor of pressure on the rupee - in May the rupee went close to 97 per dollar, closing at 95.69 on 22 May; about 5% down since the start of the West Asia war (IE). RBI made gross foreign-exchange sales of $29.6 billion in March (a 13-month high); total gross sales in FY26 were $195.38 billion (FY25: $398.71 billion), and net sales $53.13 billion (FY25: $34.51 billion). After six months of net FDI outflow, net FDI in February was $4.44 billion (a nearly four-year high) - according to IE, investor sentiment improved after the India-US joint trade statement in early February (7 February 2026; the interim agreement not finally signed); but as soon as the West Asia war began at the end of February, foreign capital left: $13.6 billion in March, $7.56 billion in April and $2.62 billion in May. As per RBI's BoP release (8 June), net FDI in Q4 FY26 was $4.2 billion (Q4 last year: $0.4 billion), while FPI saw a net outflow of $16.4 billion in FY26.
Mains Practice Question
"Despite the record level of gross FDI inflows, what does the gap in net FDI indicate about the Indian economy? Analyse the factors and policy implications." (General Studies-III; 250 words)
Sectors, Source Countries and Policy
As per the DPIIT factsheet (table in the Lok Sabha answer), the top sectors in FY26: computer software-hardware $13.95 billion (FY25: $7.81 billion), services sector $10.01 billion (FY25: $9.35 billion), trading $4.01 billion; telecommunications fell to $0.12 billion (FY25: $0.75 billion); cumulative top-two from April 2000 to March 2026: services ($128.85 billion) and computer ($124.64 billion). According to the government, more than 90% of FDI comes through the automatic route; recent reforms: defence, insurance, petroleum-natural gas, telecommunications, space; major facilitation measures include PLI, NSWS, PM Gati Shakti, PMG etc.
From the Exam's Perspective
- GS-3 (external sector): Computation of gross versus net FDI; the role of repatriation/ODI; FDI versus FPI behaviour (FY26: FDI net +$6.9 billion, FPI -$16.4 billion).
- GS-3 (exchange rate/intervention): Weak net inflow - pressure on the rupee - the chain of RBI intervention; figure: $53.13 billion net sales in FY26.
- GS-2/3 (policy): ODI liberalisation 2022, automatic route >90%, sectoral reforms; the "quality of investment" debate (manufacturing versus SPV).
- Prelims facts: FY26 gross FDI ~$94.8 billion (record), net $6.95 billion; repatriation $53.58 billion; ODI $33.29 billion; $11.17 billion from the US (doubled).
Sources
- Lok Sabha Unstarred Question 10, "Decline in India's Net Foreign Direct Investment" (answer: Minister of State for Finance Pankaj Chaudhary), 20 July 2026 - sansad.in
- RBI press release, "Developments in India's Balance of Payments during Q4:2025-26", 8 June 2026 - rbi.org.in
- The Indian Express, "Gross FDI into India hit new record of $95 billion in FY26, but net inflows only $7.7 billion", 22 May 2026 - indianexpress.com
- The Economic Times, "FDI equity inflows up 18% in FY26, US investments double", 4 June 2026 - economictimes.com