NEW DELHI: Finance Minister Nirmala Sitharaman on Monday said that funds are not flowing to India because of economic or commercial reasons, but for geopolitical and strategic reasons.
Responding to concerns over negative net foreign direct investment (FDI) growth, Sitharaman said that in theory, global capital should gravitate towards economies demonstrating stability, predictability and strong economic indicators.
“Global funds move based on macroeconomic performance, policy stability, taxation certainty and rule of law. All fundamentals here are strong. You would expect funds to flow to India,” she said.
She noted that the Government of India has ensured tax certainty and policy predictability, and that economic indicators suggest stable growth over the next few years. Yet, capital flows have not risen proportionately.
“If it does not flow, then we must ask what else is holding it back. Certainly not economic or commercial reasons,” she said, adding that geopolitical or strategic considerations could be influencing global investment decisions.
According to the RBI monthly bulletin published recently, net foreign direct investment remained negative for the fourth consecutive month in December 2025, coming in at -$1.6 billion, due to repatriation by foreign companies in India and outward investments by Indian companies exceeding the amount of direct investment entering the country.
Speaking on the issue, RBI governor Sanjay Malhotra emphasised the need to distinguish between net and gross FDI. Gross FDI inflows have increased — by around 14–15% last year — and are continuing to grow this year as well.
The decline in net FDI, she explained, is largely due to repatriation of funds by foreign investors. In addition, Indian companies are increasingly investing abroad, reflecting their growing strength and global ambitions. These outward investments also reduce the net FDI figure.
The finance minister said the Economic Survey had raised similar questions about the divergence between strong domestic fundamentals and lower-than-expected capital inflows.