Money in, money out: Negative net inflows pull down India's FDI status

Rising repatriation is outpacing overseas spending.

Funds repatriated by investors — including dividend and interest income — offset robust foreign direct investment (FDI) inflows into India for the sixth consecutive month in January. Coupled with FDI outflows, this resulted in a net outflow.

 

Over the past 13 months, outward FDI has remained relatively stable, while repatriation has more than doubled.

 

According to the Commerce and Industry Ministry, gross FDI inflows have more than doubled over the past decade, rising from $34 billion in FY13 to more than $80 billion in FY25. In the first nine months of FY26, inflows reached $73.7 billion — up 16 per cent from $63.1 billion in the same period the year before.

 

While gross inflows remained strong April 2025 to January 2026, rising repatriation and overseas direct investments have kept net FDI negative since August 2025. In this period, repatriation outpaced fresh inflows.

 

Net FDI is fragile. Of the 13 months between January 2025 and January 2026, eight recorded negative flows. Repatriation has risen sharply: From $2.07 billion in January 2025 to $4.92 billion in January 2026.

 

July 2025 was an exception, with net FDI hitting $5 billion on unusually low repatriation. But the broader trend is clear: Foreign investors are pulling capital back at a pace that gross inflow figures do not reveal. 

 

Sectoral FDI composition has shifted over the five years since FY20. Foreign investors appear to be shifting from pure technology plays to services and energy.

 

Notably, FDI inflows in banking — the top-ranked services sector — dropped 87 per cent from $898 million in FY23 to $115 million in FY25.

 

Computer software and hardware got nearly 44 per cent of inflows in FY21, but retreated to 14 per cent by FY25. The services sector has taken the lead, rising to 19 per cent. Non-conventional energy jumped from under 3 per cent in FY20 to over 8 per cent in FY24. Trading and construction remain steady. 

 

Indians’ overseas investment is focused on a few places. Singapore accounted for 30 per cent of outflows in FY26 — its highest share in recent years. Mauritius’ share increased from 3 per cent in FY24 to over 12 per cent in FY26. The United Arab Emirates’ share tripled from 3.36 per cent in FY20 to 11 per cent in FY25, reflecting deepening India-Gulf business ties. 

 

As repatriation rises and net FDI stays under pressure, the priority must go beyond attracting new investors — retaining existing ones is equally critical. Understanding why foreign investors are pulling out capital is the first step toward reversing the trend and ensuring India’s FDI story delivers on its full potential.