After staying subdued over the last few years, India’s net foreign direct investment inflows are expected to rise in the current financial year on the back of higher gross inflows and slower repatriation outflows, economists said.
Economists project net FDI inflows to rise to a four-year high of around $15 billion in 2026-27 (April-March), up from $6.9 billion in FY26. In the first two months of FY27 alone, net FDI inflows have been 160% higher year-on-year at $6.5 billion.
Net FDI inflows had drastically declined to less than $1 billion in FY25 from a high of $44 billion in FY21. Gross FDI inflows, meanwhile, have continued to rise and hit a record high of $94.8 billion in FY26. Gross inward FDI increased to $ 21.4 billion in April-May from $ 17.1 billion during the same period a year ago.
Tapering Repatriations
“Gross FDI is not a challenge. The issue is repatriation and overseas investment by Indian companies, which is likely to continue this year as well,” said Gaura Sen Gupta, chief economist, IDFC First Bank. “This year the repatriation pressure will be lower. Indian equity markets are less overvalued so need to book profits is lower.”
Repatriations rose 5% in FY26 to $54 billion, though the pace of growth was much slower than 16% seen in FY25. In April-May, repatriations were down 10.6% on year at $7.6 billion.
“We believe growth in repatriation outflows has likely peaked, as the strong post-pandemic phase of profit booking and PE/VC exits appears to be fading,” CareEdge Ratings said in a report. “Apart from the tapering of repatriation outflows, the gradual strengthening of gross FDI inflows further reinforces our view that net inflows will improve in FY27 compared with the previous fiscal year.”
Elevated Outbound Investments
Overseas investments by Indian companies has continued to rise and is not expected to slow down even in FY27, thus putting pressure on net FDI flows. Last year, outward FDI grew 20% to $33.84 billion, following a near 70% increase in FY25. FDI by Indian companies was up 20% on year in April-May at $7.3 billion.
“FDI by India remains elevated as companies continue to leverage lower regulatory friction under the new overseas investment framework instituted in 2022 and diversify operations,” economists at CareEdge said. “Outbound FDI is likely to continue to remain healthy in FY27 as well.”
According to Dhiraj Nim, economist at ANZ Bank India, the global situation has not been conducive for the FDI into India in recent years.
“India’s policy steps have been in the right direct in recent times but a far more benign global growth outlook is required for net FDI inflows to pick up again. India will also have to become part of the global supply chains where investments are flowing right now to see higher investment,” Nim said, adding that he expects net FDI inflows to be around $10-$15 billion in FY27.