Net FDI rebounds to USD 7.7 bn in FY26, but portfolio flows short for financing CAD: RBI

Mumbai: India's net foreign direct investment (FDI) rebounded sharply in FY26 but the capital flows remained short of financing the current account deficit (CAD), the Reserve Bank said on Friday.

Net FDI inflows stood at USD 7.7 billion in 2025-26, a sharp rise from USD 1 billion in 2024-25, though they remained below USD 10.2 billion in 2023-24 and substantially lower than USD 28 billion in 2022-23, the RBI annual report showed.

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The rebound in net FDI came alongside a rise in gross inward FDI inflows to USD 94.5 billion in 2025-26, up from USD 80.6 billion a year ago.

However, repatriation and disinvestment by foreign investors increased to USD 53.6 billion, while outward FDI by Indian companies rose to USD 33.3 billion, limiting net inflow gains.

"Within capital flows, FDI stood higher, both on gross and net basis, during 2025-26," the RBI said, adding that according to fDi Markets India ranked second globally in greenfield FDI announcements during 2025-26 after the US.

The central bank said the services sector accounted for a major share of FDI equity inflows during 2025-26, followed by manufacturing. Singapore, the US, Mauritius, Japan, the Netherlands, and the UAE together contributed around four-fifths of total inflows.

However, the RBI noted that the global investment environment remained challenging, and net capital flows during April-December 2025 moderated and fell short of financing the CAD, resulting in a depletion of foreign exchange reserves by USD 30.8 billion on a balance of payments basis, excluding valuation effects, during the period.

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Foreign portfolio investment (FPI) flows remained volatile during the year, with net outflows of USD 16.5 billion in 2025-26, driven mainly by the equity segment. In March 2026 alone, net FPI outflows stood at USD 13.1 billion, triggered by the outbreak of the West Asia conflict on February 28, 2026, the RBI said.

The debt segment, however, witnessed modest inflows of USD 2.1 billion in 2025-26, reflecting investor preference for relatively safer assets amid global uncertainty, it said.

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