Net foreign direct investment (FDI) inflows turned negative again in May, after being in the positive territory for four straight months. Net FDI outflows in May were $0.1 billion, against net inflows of $0.9 billion a year ago, data released by the Reserve Bank of India (RBI) said on Wednesday.
Net FDI inflows had risen to a near-five-year high of $6.6 billion in April. For the April-May period, net FDI inflows were still 160% higher year-on-year at $6.5 billion.
Net FDI remained negative for five consecutive months from August to December last year due to a rise in repatriation and outward FDI.
While gross FDI inflows have remained resilient in recent months, the rise in net FDI outflows in the second half of 2025 had raised alarm bells for the economy.
The sharp decline in foreign direct investment along with a rise in foreign portfolio investment outflows pushed India’s balance of payments (BoP) into a deficit of $4.4 billion in May from a $4.4 billion surplus a year ago. The country recorded a BoP deficit of $6.6 billion in April.
The BoP deficit increased over four-fold year-on-year to $11 billion in April-May, driven higher by large foreign portfolio outflows.
Net foreign portfolio investment (FPI) outflows rose to $4.7 billion in May against net inflows of $1.3 billion a year ago. However, the May print was lower than net FPI outflows of $7.3 billion in April.
With both net FDI and net FPI outflows rising in May from a year ago, India’s capital account slipped into a deficit of $2.4 billion against a surplus of $3.7 billion in May 2025. Short-term credit to India of $3.2 billion in May helped keep the capital account deficit in check.
During April-May, net FPI outflows rose to $12 billion from $0.8 billion a year ago.
CURRENT ACCOUNT
As with the capital account, India’s current account was also in a deficit of $2 billion in May caused by a wider merchandise trade deficit, RBI data showed. The current account was in a surplus of $0.7 billion in May 2025. The April-May current account balance was in surplus of $2.8 billion, against a deficit of $4.1 billion in the corresponding period a year ago.
Goods trade deficit widened 23% on year to $27.9 billion in May, while the services trade surplus remained steady at $15.7 billion during the month. Net transfers, which include remittances, rose 30% on year to $13.6 billion in May, limiting the rise in the current account deficit.
This is only the second time the RBI has released monthly data on India’s balance of payments.
In the March quarter, India’s current account surplus fell to $7.1 billion from $13.7 billion a year ago, reflecting the impact of the war in West Asia, higher oil imports and large foreign portfolio outflows. The current account surplus was 0.7% of GDP in January-March period, down from 1.4% a year ago.
