India's Net FDI Falls 21.1% to $4.91 bn in Q1 FY26 Due to Higher Outward Flows

India's net FDI fell 21.1% YoY to $4.91 billion in Q1FY26 due to higher outward investments and repatriation, despite strong gross inflows of $25.17 billion, up from $22.77 billion a year ago. Outward FDI rose to $7.87 billion, and repatriation/divestment reached $12.38 billion. The US, Cyprus, and Singapore accounted for over three-fourth of total FDI inflows.

India's net foreign direct investment (FDI) fell 21.1% year-on-year (YoY) to $4.91 billion in Q1FY26, according to data from the Reserve Bank of India (RBI). This decline was driven by a significant increase in outward investments and repatriation, despite robust gross inflows of $25.17 billion, up from $22.77 billion in the same period last year. Gross investments in June stood at $9.2 billion, while net FDI fell 52% YoY to $1 billion [2].

The US, Cyprus, and Singapore accounted for over three-fourths of total FDI inflows, highlighting their continued dominance in India's FDI landscape. Experts believe that FDI inflows are a more stable source for India's foreign exchange reserves compared to portfolio flows [2].

Meanwhile, the Indian government is signaling an evolving approach to Chinese FDI. A senior government official indicated that India is open to easing restrictions on FDI from China, with Press Note 3, which mandates prior approval for investments from neighboring countries, potentially being reconsidered [1]. This shift comes amid improving diplomatic ties between New Delhi and Beijing, with high-level engagements including ministerial visits and talks on tourism, trade, and border issues [1].

The government's move to relax FDI rules for China follows a strategic recalibration of trade ties, triggered by US President Donald Trump's 50% tariffs on Indian goods while leaving China largely untouched. Commerce Minister Piyush Goyal has hinted at flexibility in the current FDI rules, acknowledging that as times change, so must the government's decisions [1].

References:

[1] https://www.business-standard.com/india-news/india-fdi-rules-china-press-note-3-niti-aayog-policy-change-125082800190_1.html
[2] https://economictimes.indiatimes.com/news/economy/finance/gross-fdi-robust-during-may-june-net-fdi-moderates/articleshow/123579308.cms