Foreign capital shuns India despite strong growth: S&P-Crisil report

Net foreign portfolio inflows fell 16.6 per cent in FY26, while net FDI stood at $7.8 billion against gross inflows of $94.5 billion amid repatriation and outward investment.

Foreign capital inflows into India dried up in 2025-26 despite the economy's strong performance, according to a report released by S&P Global and Crisil on Wednesday.

 

Net foreign portfolio inflows declined 16.6 per cent in FY26, the report, India Forward: Reimagining Growth, said. Foreign portfolio investors sold Indian equities for three consecutive months between April and July 2026.

 

Capital inflows were unable to finance even a current account deficit of 0.6 per cent of gross domestic product, leading to a sharp depreciation of the rupee, the report said.

 

Gross foreign direct investment stood at $94.5 billion in FY26. However, net inflows were only $7.8 billion, owing to repatriation by foreign investors and outward investment by Indian companies. Reserve Bank of India data puts repatriation and disinvestment at $53.58 billion for the year. The report does not specify how much of this came from investors exiting through share sales.

 

 

The report said the share of emerging sectors in industrial investment is likely to rise to 25–27 per cent over the next five years, from 12 per cent. These sectors include defence, data centres, solar, batteries and semiconductors. Localising the clean-technology supply chain could require $40–50 billion by 2035.

 

S&P's SPIVA data showed over 70 per cent of active Indian funds lagged their benchmarks over ten years.

 

Crisil projects growth of 7 per cent in FY27, assuming crude prices of $82–87 a barrel. Brent crude traded near $107 on Monday.