Foreign direct investment into India is holding close to record levels, but the pattern within these inflows is becoming more selective. Morgan Stanley says gross foreign direct investment stands at $90.8 billion on a 12-month trailing basis as of January 2026, rising to this level from $80.3 billion in January 2025. At the same time, net foreign direct investment drops sharply to $0.5 billion, one of the lowest levels on record, due to rising profit repatriation and a surge in outward investments.
Morgan Stanley says global capital continues to enter India, but it is concentrating in a narrower set of sectors. Services, targeted manufacturing segments, and digital infrastructure are receiving the bulk of inflows, while outflows are rising across profits and overseas expansion by Indian firms.
Morgan Stanley on services sector taking largest share
Services remain the biggest recipient of foreign direct investment into India. Morgan Stanley data shows the sector accounts for 45.9% of total inflows in 2025, maintaining its lead position .
The report says financial services, software, and digital platforms continue to draw strong foreign interest despite fluctuations in earlier years.
“Service sector remains the largest beneficiary,” Morgan Stanley says.
Within this segment, information technology and business process outsourcing inflows rise to $12,997 million in 2025 from $10,074 million in 2024. Financial services also continue to receive steady capital, even as some moderation is visible year on year .
Morgan Stanley says the sustained inflows indicate that global investors continue to view India primarily as a large and expanding digital market.
Morgan Stanley on manufacturing seeing focused inflows
Manufacturing accounts for 25.3% of foreign direct investment inflows in 2025, rising to this level from 23.8% in 2024, according to Morgan Stanley.
The report says the nature of investments within manufacturing is becoming more targeted, with capital flowing into specific sectors rather than broad-based expansion.
Automobile sector inflows increase to $2,163 million in 2025 from $1,861 million in 2024. Electronics investments remain elevated following a sharp rise in the previous year .
“Flows within manufacturing have diversified to sectors such as autos and electronics, supported by policy impetus,” Morgan Stanley says.
The firm says global companies are building supply chain linked operations in India, especially in electronics and telecom hardware.
Morgan Stanley on data centres drawing global capital
Morgan Stanley identifies data centres as a growing segment within foreign direct investment. The report says data centres account for a significant share of global greenfield investment activity in 2025.
India ranks among the top destinations for such investments between January and September 2025.
“Data centers are an emerging opportunity that has a significant role in shaping the evolving FDI landscape,” Morgan Stanley says.
The report says rising data consumption, expansion of digital services, and policy support are driving investments in this segment.
Morgan Stanley on real estate and infrastructure flows
Real estate and construction account for 4.5% of total foreign direct investment inflows in 2025, rising to this level from 4.1% in 2024, according to Morgan Stanley.
The report says logistics, warehousing, and urban infrastructure projects continue to attract capital, often through infrastructure funds and sovereign wealth investors.
“Infrastructure funds and sovereign wealth fund investments in highways, warehousing and real estate have supported flows,” Morgan Stanley says.
Energy and infrastructure segments continue to receive investment, though inflows moderate compared to earlier levels.
Morgan Stanley on concentration of inflows by source
Morgan Stanley says foreign direct investment into India remains concentrated among a limited number of countries. The top ten countries account for 91.4% of total inflows in 2025, rising to this level from 85.7% in 2020.
Singapore contributes 36.7% of total inflows in 2025, followed by the United States at 17.0% and Mauritius at 11.1%.
“The origin of India’s FDI inflows remains highly concentrated,” Morgan Stanley says.
The report says Maharashtra and Karnataka continue to receive a large share of investments within India due to better infrastructure and ease of doing business.
Morgan Stanley on rising profit repatriation
Morgan Stanley says a significant portion of foreign capital is now flowing out of India through profit repatriation.
Repatriation rises to $55.4 billion in 2024 from $39.6 billion in 2023, before easing to $52.1 billion in 2025.
On a 12-month trailing basis, repatriation stands at $54.5 billion as of January 2026.
“As India has built up a large stock of FDI over the past several years, foreign firms are increasingly repatriating profits,” Morgan Stanley says.
The report says higher profitability of multinational subsidiaries and easier transfer mechanisms are driving these outflows.
Morgan Stanley on outward investment by Indian companies
Morgan Stanley says outward foreign direct investment by Indian firms is rising sharply.
Outward investment increases to $35.7 billion in 2025 from $24.2 billion in 2024, marking a strong rise over two years .
“Indian corporations have increasingly been investing abroad and making strategic acquisitions overseas,” Morgan Stanley says.
The report says sectors such as financial services, manufacturing, and trade are leading this expansion, with destinations including Singapore, the United States, and Europe.
Morgan Stanley on net FDI hitting record lows
Morgan Stanley says net foreign direct investment declines sharply due to the combined effect of rising repatriation and outward investment.
Net foreign direct investment falls to $3.4 billion in 2025 from $14.2 billion in 2023, and further declines to $0.5 billion on a 12-month trailing basis as of January 2026 .
“Net FDI remains near all time low, constrained by increasing incidence of repatriation and outward FDI,” Morgan Stanley says.
The report says net flows remain important for assessing external balance and stability.
Conclusion
Morgan Stanley says gross foreign direct investment into India remains strong at around $90 billion, led by services, selective manufacturing segments, and digital infrastructure. At the same time, rising profit repatriation and outward investment by Indian companies are driving capital outflows, keeping net foreign direct investment at low levels.
The data indicate that global capital continues to enter India, but it is concentrating in specific sectors while flows in the opposite direction are increasing.
Disclaimer: Investment analysis and sector data provided here are for informational purposes based on third-party reports and should not be construed as direct financial advice or an offer to invest. While these trends highlight emerging sectors, readers should consult a SEBI-registered financial advisor before making any investment decisions, as market conditions and sectoral risks can vary significantly.
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