Page 19 - CII-ARTHA

MARCH 2026

Figure 4: FDI Flows to / from India (US$ billion)
100.0
80.0
60.0 Gross FDI Inflows
40.0
Repatriation /
20.0 Disinvestment
0.0
Outward FDI
-20.0
-40.0 Net FDI
-60.0
-80.0
-100.0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26*

*Till December 2025
Source: RBI-DBIE Database

Recent trends in FY 2025-26 suggest a more volatile External factors have also played a role. Increased
pattern. Repatriation and disinvestment remained global competition for capital and rising interest rates
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relatively stable during the initial months of the fiscal year in developed economies, particularly U.S. Fed rate hikes,
but accelerated sharply from September 2025, with a are redirecting investments toward markets offering
pronounced spike in November 2025. At the same time, higher returns. In addition, a growing share of FDI inflows
outward FDI, which was subdued in the early part of the comprises short-term financial flows from private equity
year, gained momentum in August and November 2025. and venture capital, which are typically held for a few
years before being repatriated, rather than contributing
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Net FDI dynamics have weakened further in FY to long-term production .
2025-26. Notably, this deterioration was driven not only
by rising repatriation and outward flows but more These trends are further reflected in IPO-led exits. A
significantly by a sharp moderation in gross FDI inflows. notable example is the US$3.3 billion Offer for Sale by
Net FDI continued to weaken even during Hyundai Motor India in October 2024, where the entire
November–December 2025, despite an increase in proceeds were remitted to its overseas parent. Similarly,
other capital flow components, indicating underlying the Swiggy IPO in November 2024, involving foreign
fragility in investment inflows. investors such as Prosus, also resulted in significant
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outflows .
“Median ratio of disinvested or repatriated funds to gross
FDI inflows was less than even 1% during the first decade Third, rising outward FDI reflects India’s evolving
of the millennium…in the next decade, hovering between investment profile.
one-fifth and one-third of the inflows…more recent trends
are a bit alarming because the ratio has suddenly surged Outward FDI (OFDI) by Indian companies has been
and almost doubled to 63.5% in the last four years ending increasing, signalling their expanding global footprint
2024–25 .” and progress in economic development, often driven by
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supply chain shifts. In FY 2025, the largest share of
OFDI was concentrated in financial, business, and
While this sharp increase raises concerns, some experts
interpret it as a sign of a maturing market with liberal insurance services; wholesale and retail trade and
entry-exit policies, or as a natural process of capital hospitality; and manufacturing, which together
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realignment driven by profit repatriation from maturing contributed over 75 per cent . Notably, these sectors
also accounted for over 50 per cent of inward FDI,
investments, narrowing interest rate differentials, and
India’s growing global integration. indicating overlapping sectoral dynamics.

11 EPW. (2025). Foreign Direct Investments Have Lost Traction. Economic & Political Weekly, 60(23).
12 Torus. (2025). How the US Fed’s Interest Rate Decision Impacts India’s Economy, Rupee, and Markets?
13 EPW (2025); Note: Temporarily, a lack of distinction between FDI and Foreign Portfolio Investment (FPI) could also be responsible.
14 Prosus. (2024). Prosus-backed Swiggy completes USUS$1.3bn IPO in India.; Malik, B. (2024). Swiggy In 2024: IPO Delivered, Profitability Next?
14 Calculated based on the data obtained from the Department of Economic Affairs, Ministry of Finance, Government of India
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