In a major relief for the government, which has faced criticism over the outflow of capital, gross FDI inflows increased 18% to $94.5 billion during FY26 from $80.6 billion a year ago. Similarly, net FDI inflows rose to $7.7 billion from $1 billion during the same period, according to the May edition of the Reserve Bank of India (RBI) monthly bulletin.
According to the RBI, gross FDI inflows have been encouraging. “This will remain robust with the recent spree of greenfield FDI announcements, especially in the finance and tech sectors,” the central bank said in its bulletin.
Net foreign direct investment (FDI) in March remained positive for the second consecutive month. According to the RBI Bulletin for May, net FDI during the month stood at $1.6 billion against $4.6 billion in February. During March, the country received gross FDI inflows of $6.2 billion.
Outward FDI declined in March, with more than half of the flows directed towards Singapore, the UAE and the Netherlands.
Rishi Shah said the FDI recovery is real but should not be over-read. He pointed out that close to $87 billion left India as repatriation, disinvestment and outward FDI, which, according to him, reflects Indian corporates maturing internationally rather than being a vote against India, “but a line that deserves far sharper disaggregation than it has received”.
However, the RBI said that with the recent correction in financial asset valuations, it expects repatriations to moderate, improving the net capital account position going forward.
Meanwhile, the central bank said in its bulletin that global economic conditions remained fragile, shaped by heightened geopolitical tensions, elevated energy costs and persistent uncertainty surrounding the growth and inflation outlook.
“The near-term outlook is somewhat clouded by supply-side pressures. Although headline inflation remains firmly within the tolerance band, the pass-through to domestic prices needs to be monitored. Financial conditions, crude oil prices and capital flows continue to pose challenges to the external sector outlook,” the RBI said in its monthly report.