Even before S&P Global Ratings upgraded its rating on India and the government announced a raft of measures to boost the economy, Foreign Direct Investment (FDI) into the country had risen to the highest in over four years in July, according to data released by the Reserve Bank of India (RBI) on Wednesday. At $11.11 billion, the gross FDI inflow in July was the highest since May 2021, when $12.32 billion had come into the country on a gross basis.
In June, gross FDI inflows into India stood at $9.57 billion, while the figure for July 2024, at $5.54 billion, was half the latest number.
“Singapore, followed by the Netherlands, Mauritius, the US and the UAE, together accounted for more than three-fourth of total inflows. Manufacturing and services including communication, computer and business services were the top recipient sectors,” the central bank’s staff noted in their monthly State of the Economy article, also published on Wednesday.
On a net basis, $5.05 billion came into India in July compared to $2.51 billion in June and an outflow of $2.69 billion a year ago. Net FDI is calculated after adjusting for investments that are repatriated by foreign companies and overseas investments made by Indian companies.
FDI is a key indicator of the health of the economy and the confidence foreign investors have in the country. S&P’s decision on August 14 to upgrade its rating on India to BBB from BBB- is expected to boost flows in the medium to long term. A day later, on August 15, Prime Minister Narendra Modi announced a wide range of economic reforms to boost domestic growth. This included cuts to the Goods and Services Tax (GST) rates that came into effect earlier this week on Monday.
Inflows have picked up steam in recent months after a disappointing 2024-25 which saw net FDI inflow total just $959 million even though gross inflows rose to $80.62 billion. The precipitous fall in net FDI in 2024-25 from $10.15 billion in 2023-24 came on the back of a sharp increase in overseas direct investments made by Indian companies and foreign companies cashing in on their past investments in India.
In 2024-25, foreign firms took back $51.49 billion to their home countries from India, up 16 per cent from 2023-24. Meanwhile, overseas FDI by Indian companies rose 69 per cent to $28.17 billion. Both these factors contributed to the net FDI in the last fiscal being negligible.
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So far in 2025-26, despite the global trade, policy, and financial market uncertainty, the numbers are on the up for India. At $10.75 billion, net FDI in the first four months of the fiscal is three times that in the same period last year, gross FDI is up 33 per cent at $37.71 billion, and repatriations by foreign companies is down 6 per cent at $16.28 billion.
On the other hand, Indian companies’ direct investments abroad are up 44 per cent at $10.68 billion.
However, in July, both repatriation of FDI and outward FDI moderated, the RBI noted in its State of the Economy article. “Outward FDI was mainly directed towards financial, insurance and business services, as well as manufacturing, with the US, Singapore, the Netherlands, Mauritius, and the UK being the major destinations. These movements together led to an increase in net FDI,” it said.
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