The distinction matters. Gross FDI measures the money entering India, but net FDI, which strips out repatriation and outward investment, shows how much foreign capital India actually retains. In the first quarter of FY27 it was $7.84 billion, a five-year high but only about a quarter of the gross figure.
Net FDI rose 50 per cent from $5.24 billion a year earlier, outpacing the 13 per cent increase in gross inflows. The June 2026 quarter was the best of the past eight on several measures. Repatriation, at 44 per cent of gross inflows, was the lowest since January-March 2025, when it was 42.6 per cent. Outward investment, at 31 per cent, was the lowest in the period. Net FDI’s 25.6 per cent share of gross inflows was the highest. But the longer-term trend is less encouraging: Between July-September 2011 and April-June 2022, net FDI exceeded half of gross inflows in 28 of 44 quarters, averaging 54 per cent. In the 16 quarters since, it has never done so, averaging just 12 per cent.
Negative net FDI, where repatriation and outward investment together exceed gross inflows, has also become frequent. It occurred only once in the earlier 44-quarter period, during the Covid-impacted April-June 2020. Since July-September 2022, it has occurred four times, most recently — and most severely — in October-December 2025.
Repatriation reflects the principal shift: In the 44 quarters to April-June 2022, it averaged 28 per cent of gross inflows and topped half in only four. Over the next 16 quarters, the average more than doubled to 57 per cent, exceeding 50 per cent in 10 quarters and 80 per cent twice, in July-September 2023 and October-December 2024. Repatriation generally relates to earlier investments rather than money received in the same quarter, and does not necessarily signal waning confidence in India.
Reserve Bank of India (RBI) Governor Sanjay Malhotra recently called rising repatriation a sign of a “mature market” where investors can enter and exit easily.
But Biswajit Dhar, a former professor at Jawaharlal Nehru University, is more wary. FDI is meant to be long-term capital, he says; if investors start behaving like short-term speculators, “there is something that the government needs to worry about in terms of its policy regime”.
Dhar points to weak labour-market conditions and insufficient consumer demand. Without stable jobs and incomes, he argues, companies will struggle to find customers and have less reason to commit capital for the long term.
Outward investment is an increasingly large drain. It averaged 18 per cent of gross inflows in the earlier period, exceeding 30 per cent in just four quarters. Since July-September 2022, the average has been 30 per cent. Indian firms have continued to acquire overseas businesses and expand abroad. Recent transactions and investments have involved Dr Reddy’s Laboratories, Zydus Lifesciences, Sun Pharma, Infosys, HCLTech, Wipro, Coforge, Airtel, Tata Steel, Tata Agratas, Sona Comstar, HEG and PI Industries.
Pronab Sen, India’s former chief statistician, calls the trend “worrying”. Companies, he argues, are earning substantial profits without investing commensurately at home, suggesting they see better opportunities overseas.
The mix of incoming capital is changing too. Equity inflows hit a six-year high of about $20 billion in the June 2026 quarter, with Japan overtaking Singapore as the top source. It is only the second time Japan has led in 15 years. The surge was driven largely by MUFG Bank’s April purchase of a 20 per cent stake in Shriram Finance, the biggest foreign investment in an Indian financial company. Other Japanese lenders followed: Sumitomo Mitsui Banking Corporation became Yes Bank’s largest shareholder with 24.22 per cent, and Mizuho Financial Group agreed to take control of Avendus Capital.
Singapore, by contrast, has led the rankings in 36 of the past 60 quarters. Together with Mauritius, the Netherlands, the US and the UAE, it accounted for about 75 per cent of equity inflows on average over the past ten quarters.
Gross FDI has broadly tracked the global cycle: Rising through the mid-2000s, recovering after the 2008 financial crisis and accelerating since FY15 despite the Covid pandemic. After falling in FY23 and FY24, it rebounded to a record $96.99 billion in FY26.
RBI Deputy Governor Poonam Gupta recently said gross FDI could exceed $100 billion in FY27. But another record would not, by itself, guarantee a comparable rise in capital retained in India.
As Dhar puts it, investors need confidence that a market exists for what they produce. Stable incomes and stronger domestic demand, he argues, would help persuade both foreign and Indian companies to invest at home.
