Early data from FY26 indicate potential for a turnaround in foreign investment flows says DEA

Department of Economic Affairs or DEA stated in a latest monthly update that in the face of ongoing global uncertainty, India achieved a capital and financial account surplus of USD 21.7 billion in FY25 on account of higher NRI deposits (USD 16.2 billion) and external commercial borrowings (USD 18.4 billion). However, during FY25, both net Foreign Direct Investment (FDI) and net Foreign Portfolio Investment (FPI) inflows declined vis-à-vis FY24, primarily influenced by cautious global investment trends shaped by geopolitical tensions and tighter financial conditions worldwide.

Early data from FY26 indicate the potential for a turnaround in foreign investment flows. flows. Gross FDI inflows grew by 5 per cent (YoY) in April-May FY26 and stood at USD 15.9 billion. There are notable improvements in equity inflows and a lower incidence of repatriations, signalling fresh confidence in India’s long-term growth prospects, particularly in sectors like digital infrastructure and manufacturing. On the portfolio investment side, net FPI amounted to USD 0.4 billion during Q1 FY26.

While the debt segment witnessed outflows of USD 4.1 billion, these were offset by inflows of USD 4.5 billion in the equity segment. This suggests that global investors are selectively re-entering Indian equities, driven by expectations of stable inflation, credible fiscal consolidation, and ongoing growth in domestic demand. The government noted that during July 2024 to mid-July 2025, there has been a cumulative inflow of USD 7.5 billion through the Fully Accessible Route (FAR).

Powered by Capital Market - Live News