While India’s gross FDI has increased in recent years, net FDI has been more variable. This divergence is consistent with a maturing investment ecosystem marked by smoother capital entry and exit and expanding two-way investment flows, explains Sunil Kumar
l What the latest RBI data show
INDIA’S FOREIGN DIRECT investment (FDI) numbers present a nuanced picture. The latest Reserve Bank of India (RBI) data indicate that between April 2025 to February 2026, gross FDI amounted to $88.3 billion, while net FDI inflows were at $6.3 billion. This reflects sizeable profit repatriation and disinvestment, alongside elevated overseas direct investment (ODI) by Indian investors, which has significantly moderated net FDI outcomes despite robust inflows.
l Why did net FDI flows weaken?
NET FDI MODERATED earlier as outflows increasingly offset inflows, even as gross investment into India has increased. As noted in the RBI’s April Bulletin, higher profit repatriation and disinvestment by foreign investors, along with an increase in ODI, resulted in net FDI remaining weak for several months. This phase coincided with the maturation of past investments, reflected in dividend payouts, share buybacks and investor exits, alongside a gradual expansion of overseas investment by Indian corporates.
More recently, net FDI turned positive in February 2026, following several months of net outflows, supported by higher gross inflows and some easing in repatriation. While ODI remains elevated, these developments are consistent with India’s transition towards two-way capital flows in a maturing investment environment, rather than as an indication of stress in the external sector.
l Widening gap between gross and net FDI
THE GAP BETWEEN gross and net FDI reflects ongoing changes in India’s external capital flows. Gross inflows have continued across equity, reinvested earnings and other capital, indicating sustained investor participation. At the same time, disinvestment and repatriation have gone up as earlier investments have matured, while outward direct investment has expanded, supported by stronger corporate balance sheets, wider global integration and a more liberal regulatory framework. Together, these developments have influenced net FDI outcomes even as inward investment activity continues.
l Why has India’s outward direct investment risen?
INDIA’S ODI HAS increased as domestic firms expanded overseas and integrated further into global value chains. The RBI data show ODI flows ($30.77 billion during April 2025 to February 2026) across financial services, energy and trading activities, manufacturing, digital platforms, with destinations including Singapore, the United States, the UAE, the Netherlands and Mauritius. This trend has been supported by relatively stronger corporate balance sheets following the pandemic and by the liberalised ODI framework introduced in 2022, which reduced regulatory frictions.
Amid ongoing geopolitical developments and global trade challenges, Indian investors are reassessing and recalibrating their overseas presence.
l What the mix of higher FDI, ODI & disinvestment says
TAKEN TOGETHER, DECENT gross FDI inflows, rising outward investment and higher disinvestment point to the Indian economy’s increasing integration with global capital markets. Gross FDI inflows at $88.297 billion during the April 2025 to February 2026 period indicate continued foreign participation at entry, while higher repatriation/ disinvestment at $51.256 billion for the same period reflects the realisation of returns on earlier investments. Rising ODI over the years highlights the expanding international presence of Indian firms.
As a result, the policy focus has gradually shifted towards managing volatility and maintaining macroeconomic stability as capital flows become more diversified.
l What has been the trend in global FDI?
GLOBALLY, FDI FLOWS have remained muted and variable, influenced by geopolitical uncertainty, supply chain adjustments and tighter financial conditions. The UNCTAD World Investment Report 2025 notes a slowdown in greenfield investment and international project finance, particularly in infrastructure and manufacturing. Cross-border mergers and acquisitions have been relatively more stable, largely reflecting consolidation and asset reallocation.
Against this backdrop, India’s ability to sustain steady gross FDI inflows places it in a relatively strong position, with recent movements in net FDI increasingly reflecting investment maturity and outward expansion rather than a deterioration in investor confidence. However, to attract higher levels of foreign capital, India must continue to strengthen the ease of doing business and aspire to consistently exceed its potential of $100 billion in gross FDI inflows on a sustained basis.
The writer is partner, Tax and Regulatory Services, EY India
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.